Microsoft earnings beat as cloud growth comes in better than feared

Microsoft shares rose 5% in extended trading on Tuesday after the software maker issued fiscal third-quarter results that exceeded analysts’ predictions.

Here’s how the company did:

• Earnings: $2.45 per share, vs. $2.23 per share as expected by analysts, according to Refinitiv.
• Revenue: $52.86 billion, vs. $51.02 billion as expected by analysts, according to Refinitiv.

Overall company revenue increased 7% year over year in the quarter ended March 31, according to a statement. Net income, at $18.30 billion, was up 9%.

Revenue in Microsoft’s Intelligent Cloud business segment, which includes the Azure public cloud, Enterprise Services, SQL Server and Windows Server, generated $22.08 billion in revenue. That’s up 16% and higher than the $21.94 billion consensus among analysts surveyed by StreetAccount.

Revenue from Azure and other cloud services grew by 27%, compared with 31% in the prior quarter. The average estimate from analysts polled by CNBC had expected 26.5% growth, while those consulted by StreetAccount were looking for 27.2%.

The Productivity and Business Process segment containing Dynamics, LinkedIn and Office, posted $17.52 billion in revenue, which was up about 11% and above the StreetAccount consensus of $17.05 billion. Microsoft said growth in revenue per user helped the company achieve 14% more revenue from commercial Office 365 productivity software subscriptions. The Teams communication app had over 300 million monthly active users during the quarter, Microsoft CEO Satya Nadella said on a conference call with analysts.

The More Personal Computing segment, featuring Bing, Windows, Surface and Xbox, delivered $13.26 billion in revenue, down 9% but more than the $12.25 billion StreetAccount consensus.

Sales of Windows operating-system licenses to device makers declined some 28%, with higher channel inventory levels hurting results. Research firm Gartner estimated that PC shipments declined 30%.

During the quarter Microsoft announced a new multibillion-dollar investment in OpenAI and said it would draw on the company’s artificial intelligence models for a new version of its Bing search engine and enhancements to the Microsoft 365 productivity software.

Notwithstanding the after-hours move, Microsoft shares are up 15% so far this year, while the S&P 500 index is up 6% in the same period.

Executives will discuss the results with analysts and issue guidance on a conference call starting at 5:30 p.m. ET.

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