Microsoft earnings trounce expectations as quarterly profit tops $10 billion

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Microsoft Corp. easily trumped expectations with an earnings report Wednesday afternoon that displayed double-digit percentage gains in profit and sales.

The most valuable public company in the U.S. reported fiscal first-quarter profit of $10.7 billion, or $1.38 a share, on revenue of $33.1 billion, up from $1.14 a share on sales of $29.08 billion a year ago. Analysts on average expected earnings of $1.25 a share on revenue of $32.15 billion, according to FactSet.

Microsoft MSFT, +0.64%  stock closed with a 0.6% gain at $137.24, giving the company a market capitalization of $1.056 trillion, then bounced between small gains and losses in after-hours trading immediately following the release of the results. The stock has increased more than 34% so far this year, as the S&P 500 index SPX, +0.28%  has gained 19.5% and the Dow Jones Industrial Average DJIA, +0.17%  — which counts Microsoft as a component — has increased 14.8%.

Microsoft’s rise to a trillion-dollar company has been driven by large gains in cloud-computing services, as it attempts to challenge Amazon.com Inc.’s AMZN, -0.20%  leading Amazon Web Services offering with its own Azure cloud service. Microsoft said that its “Intelligent Cloud” segment recorded revenue of $10.8 billion, higher than the average analyst estimate of $10.42 billion. Microsoft said that Azure grew by 59%; the company does not break out Azure revenue nor operating income specifically, as Amazon does with AWS.

Microsoft’s legacy personal-computer business, a segment it calls “More Personal Computing,” reported revenue of $11.1 billion, better than the average analyst estimate of $10.9 billion. Overall PC sales have been exceeding projections this year as the end of support for Microsoft’s Windows 7 operating system approaches.

Opinion: Microsoft’s earnings report will likely make believers out of cloud-software skeptics

Microsoft’s other reporting segment, “Productivity and Business Solutions” — which includes software such as the Office suite of products as well as LinkedIn and some other businesses — reported revenue of $11.1 billion, beating the average analyst estimate of $10.88 billion. LinkedIn revenue grew 25% in the fiscal first quarter, Microsoft reported.

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