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Software giant Microsoft reported better than expected September quarter earnings Tuesday after the close. The Azure public cloud for hosting applications and websites grew 48%, accelerating from 47% in the prior quarter, faster than the 44% growth. Server products and cloud services revenue advanced 22%. 

Microsoft is the clear No. 2 provider of on-demand computing processing and storage behind market pioneer Amazon.com.

 

Microsoft Third Quarter Earnings After Tuesday Close

$1.82 Beat EPS $1.54 Forecast and $37.5 Bil Revenue Beat $35.72 Billion Forecast

Earnings

Microsoft Corp. (NASDAQ: MSFT) reported september quarter earnings: $1.82 per share, adjusted, vs. $1.54 per share as expected by analysts, according to Refinitiv. Revenue was: $37.15 billion, vs. $35.72 billion as expected by analysts, according to Refinitiv.

 MSFT Earnings Q1 21 Azure

 

Market Reaction After hours $208.93 ▼$4.32 (-2.03%)

Highlights

  • Microsoft revenue grew 12% on an annualized basis, down from 13% growth in the prior quarter, according to a MSFT statement.
  • Revenue for commercial PCs cratered 22% months after support for Windows 7 ended; the category had surged last year, making outperformance this year more difficult.
  • The Azure public cloud for hosting applications and websites, grew 48%, accelerating from 47% in the prior quarter. Microsoft doesn’t disclose revenue from Azure in dollars. Analysts had expected around 44% growth.
  • Microsoft’s Intelligent Cloud segment, featuring Azure, Enterprise Services, GitHub and server products such as SQL Server and Windows Server, contributed $12.99 billion in revenue, up 20% year over year and more than the $12.73 billion consensus among analysts polled by FactSet.
  • The Productivity and Business Processes segment, which includes Dynamics, LinkedIn and Office, delivered $12.32 billion in revenue. That’s up 11% and higher than the $11.78 billion FactSet consensus.

MSFT Earnings Q1 21 Services

  • Teams, one part of the Office 365 productivity app bundle, now has over 115 million daily active users, up from 75 million in April.
  • Revenue from the More Personal Computing segment, containing search advertising, Surface, Windows and Xbox, came to $11.85 billion. That means the segment’s revenue grew 6% year over year, and it was above the $11.18 billion consensus among analysts surveyed by FactSet.
  • Licensing revenue from Windows device makers declined 5% in the quarter, and licensing revenue for commercial devices in particular fell some 22%, compared with the 4% decrease in the prior quarter, the worst performance in more than five years.
  • Technology industry research company Gartner estimated that third-quarter PC shipments grew 3.7% year over year and saw the fastest growth in the U.S. in a decade.
  • The Commercial Cloud collection of products, including Azure, Dynamics 365, commercial LinkedIn and Office 365 services, added up to $15.2 billion in revenue, representing almost 41% of total revenue, up from around 38% in the prior quarter. Commercial Cloud gross margin was 71%, passing the 70% mark for. the first time.
  • This is the first quarter Microsoft benefits from an accounting change that extended the useful life of its server equipment from three years to four years.

MSFT Earnings Q1 21

Outlook

Q2 revenue guidance

  • Office consumer growth of mid single digits
  • Full yr double digit commercial growth 
  • "Azure growth will remain strong"
  • Enterprise services growth of low single digits
  • Gaming growth in the high 20% range @Xbox game pass service up to 15M MAUs -"We are delighted by early Xbox reviews" -"will be most affordable & powerful console available" "Pace of users adopting multiple Office 365 workloads has accelerated"
  • Hardware gaming growth of 40%

Source: MSFT, CNBC

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