Microsoft Corp. dwarfed earnings and sales estimates and produced stronger-than-expected revenue across all its business segments in an earnings report on Tuesday, but shares still fell initially after the results were released.
microsoft MSFT,
reported fiscal third-quarter earnings of $16.73 billion, or $2.22 per share, compared with $2.03 per share a year ago. Revenue rose to $49.36 billion from $41.71 billion in the same period last year. Analysts on average had expected earnings of $2.19 per share on sales of $49 billion, according to FactSet.
Shares of Microsoft fell more than 2% in after-hours trading immediately after the results were released, but then recovered with slight gains in the spotty action. The stock had closed down 3.7% at $270.22.
Microsoft’s software business increased sales by more than $2 billion after the company substantially increased prices across the board on its popular Office 365 suite of products for the first time since moving to a cloud offering. a decade ago. Sales in the “Productivity and Business Solutions” segment rose to $15.79 billion from $13.55 billion a year ago, while analysts on average expected $15.75 billion, according to FactSet.
Office 365 price increase, announced last yearwas supposed to go into effect in early March, but the company delayed the price increase for some customers. The actual outcome of the price increase could be difficult to analyze until Microsoft issues financial guidance, which usually occurs on the company’s conference call. Jefferies analysts noted that customers may have rushed to lock in the lower prices by signing new deals ahead of the price increase, which would be a boon for the third quarter but could hurt the company’s forecast for the third quarter. The rest of the year.
“Office may have benefited from an advance since the price increases went into effect on March 1, as some customers may have renewed before the increase. This strength may be a potential risk to Office to the upside for the remainder of this calendar year,” the analysts wrote in an April 18 note, while maintaining a buy rating and a $400 price target.
Microsoft’s most lucrative segment is “Intelligent Cloud,” which includes its cloud computing product Azure, as well as sales of servers and other local products. The cloud segment reported revenue of $19.05 billion, up from $15.19 billion a year ago, while analysts on average forecast $18.89 billion. Microsoft said Azure revenue was up 46%; the company does not break out revenue specifically for Azure, though rivals Amazon.com Inc. AMZN,
and Alphabet Inc. GOOGL,
GOOG,
state sales of its competing platforms, Amazon Web Services and Google Cloud, respectively.
Microsoft’s “More Personal Computing” segment grew to sales of $14.52 billion from $13.04 billion a year ago, despite fears that the pandemic boom in personal computer sales has come to an end. Analysts had forecast sales of $14.3 billion on average, and forecasts for the fourth quarter suggest slower growth in the segment is ahead.
Microsoft executives plan to host a conference call at 5:30 p.m. ET, which is normally when they share their forecast, which is known to be the driving force behind the stock move in the wake of a company earnings report. company. Three months ago, for example, Microsoft shares reversed a post-earnings slide after its guidance beat expectations.
Microsoft shares are down 19.7% so far this year, according to the S&P 500 SPX Index,
has decreased by 9.9%. The drop has Microsoft in danger of falling below a $2 billion market capitalization for the first time since June 2021, according to data from FactSet; at the closing price, Microsoft had a valuation of about $2.03 trillion.
Reference-www.marketwatch.com