Technology

Microsoft Delivers on Growth, and Not Just in the Cloud

Jon C. Ogg

Published: October 27, 2020 5:14 pm

Last Updated: October 27, 2020 5:34 pm

Microsoft Corporation (NASDAQ: MSFT) has been pleasing investors routinely with earnings thanks to its ever-growing cloud business that was championed by Satya Nadella. Tuesday’s earnings report appeared to be another victory for the software giant. All of its core operation segments posted strong growth, particularly its Azure and additional cloud services and videogames ahead of the coming Xbox refresh.

The company’s fiscal first-quarter generated earnings of $13.9 billion and Revenues rose to $37.2 billion. This translates to $1,82 EPS, up from $1.38 EPS in the same quarter a year earlier. Microsoft’s revenues from a year ago were $33.06 billion.

We had the consensus estimates pegged at $1.54 EPS for the last quarter with revenues of $35.75 billion.

Microsoft’s stock closed higher by 1.5% at $213.25 ahead of the report, but its shares were last seen down about 4-cents after the close in Tuesday’s after-hours trading session. Its stock was last seen up about 35% year-to-date.

The following highlights from the first quarter were seen in the earnings report:

• Surface revenues rose 36%
• Xbox content and services revenues rose 30%
• LinkedIn revenues rose 16%
• Office commercial products and cloud services revenues rose 9%
• Office consumer products and cloud services revenues rose 13%
• Sent $9.5 billion back as dividends and buybacks combined
• Revenue in Intelligent Cloud was $13.0 billion and increased 20%
• Server products and cloud services revenue increased 22%

The areas where Microsoft was slower in the quarter were as follows:

• Windows OEM revenue declined 5%
• Search advertising revenue excluding traffic acquisition costs decreased 10%

One aspect of the corporate earnings release that may have been disappointing to some investors is that Microsoft noted that guidance would come in the quarterly conference call. Microsoft was also featured as being among the 9 best potential Dow earnings reactions.

Refinitiv’s consensus estimates are calling for $1.60 EPS and $40.4 billion in revenues for the quarter, which would translate to 9.5% sales growth from $36.9 billion and against earnings of $1.51 EPS.

Microsoft’s stock has traded in a 52-week range of $132.52 to $232.86 and Refinitiv had a $230.72 consensus analyst target price.