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Software giant Microsoft reported boom Q4 2021 quarter earnings Tuesday after the close. The Azure public cloud for hosting applications and websites still accelerating. Productivity and business processes and More Personal Computing also excelled.

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

 

Microsoft Fourth Quarter Earnings After Tuesday Close

$2.17 Beat EPS $1.91 Forecast and $46.20B Beat Revenue $44.13 Billion Forecast

Conference call: 5:30 p.m.

Updated After Earnings 7/27/21

  • Q4 EPS $2.17 ($1.91)
  • Q4 Revenue $46.20B (est $44.13B)
  •  Returned $10.4B In Form Of Share Repurchases
  • For the full year, Microsoft totaled $61.27 billion in profit on sales of $168.09 billion, both easily exceeding the records established in its previous fiscal year.
  •  Will Provide Forward-Looking Guidance On Conference Call

“Our results show that when we execute well and meet customers’ needs in differentiated ways in large and growing markets, we generate growth, as we’ve seen in our commercial cloud – and in new franchises we’ve built, including gaming, security, and LinkedIn, all of which surpassed $10 billion in annual revenue over the past three years,” Chief Executive Satya Nadella said in a statement.

Market Reaction 287.00▲ 0.46 (0.16%) After Hours

Highlights

All of Microsoft’s segments produced better growth than analysts expected in the final three months of the company’s fiscal year, which included the launch of a new Xbox and a new version of Windows.

“Productivity and business processes,” which comprises most of Microsoft’s cloud-software offerings, grew to $14.69 billion in sales from $11.75 billion a year ago, topping analysts’ average expectations of $13.93 billion.

“More Personal Computing,” the traditional PC business, grew to $14.09 billion from $12.91 billion, beating the average analyst forecast of $13.78 billion.

“Intelligent Cloud,”, the biggest segment for Microsoft which wraps in its Azure cloud-computing offering with sales of servers and other equipment needed for a hybrid-cloud setup. Microsoft reported record quarterly sales of $17.38 billion in that segment, up from $13.37 billion a year ago and beating the average analyst estimate of $16.39 billion. The company said that Azure sales grew by 51%, easily topping the average analyst estimate of 44.7%.

Analysts expect growth to continue in Microsoft’s new fiscal year, predicting ahead of the report that profit will grow to more than $63 billion and sales will increase to $186.74 billion in the 2022 fiscal year.

“We think Azure continues to take share, demand for PCs remains robust, and Office, Teams, and Dynamics likely continue to grow in the double digits.” Microsoft Chief Financial Officer Amy Hood said Tuesday that Microsoft expects to keep growing.

MS Earnings Q4 21

Outlook

Hood forecast revenue of $43.3 billion to $44.2 billion in the fiscal first quarter, which topped analysts’ average expectations for sales of $42.5 billion and would reflect growth of at least 16.5% from the same quarter last year.

Hood expects $16.4 billion to $16.65 billion for “Intelligent Cloud”; $14.5 billion to $14.75 billion for “Productivity and business processes”; and $12.4 billion to $12.8 billion for the “More Personal Computing” segment, which will be impacted by a $300 million Windows 11 deferral to the second quarter.

Those ranges beat analysts’ estimates for all but the PC segment, which was in-line due to the deferral.

While Microsoft did not provide a full-year forecast, Hood did say their outlook for fiscal 2022 “reflects healthy double-digit revenue and operating income growth” that “results in expanded operating margins.”

Hood also provided insight on Azure growth moving forward, which Microsoft has not done in the past. “In constant currency, Azure revenue growth should remain relatively stable on a sequential basis,” Hood noted, suggesting that the growth of more than 50% from Azure could continue.

 Microsoft has already reached a $2 trillion market cap this year thanks to 2021 growth of 28.6%, easily outpacing the 17.7% growth of the S&P 500 index and 14.8% increase of the Dow Jones Industrial Average which counts Microsoft as a component.

 

Earnings Preview

Microsoft Corp. (NASDAQ: MSFT) report June quarter earnings Tuesday with Projected EPS: $1.91 and Projected revenue: $44.13 billion

Microsoft earnings were another big beat in Q3 (Mar)postpng 19.1% yr/yr revenue growth to $41.71 bln surpassing expectations. MSFT said that even a year into the pandemic, digital adoption curves was not slowing down but accelerating. In terms of revenue, growth did not result from just one or two business areas.

MSFT reported strong upside relative to prior guidance in all three segments last quarter:

  1. Productivity and Business Processes (Office 365, LinkedIn, Dynamics 365),
  2. Intelligent Cloud (Azure, SQL Server, Windows Server),
  3. More Personal Computing (Windows, Surface, Xbox).
  • Azure revenue grew 50% yr/yr vs 50% growth in DecQ and 48% growth in SepQ.
  • LinkedIn revenue rose 25% yr/yr vs 23% growth in DecQ.
  • Dynamics 365 revenue rose 45% yr/yr vs 39% growth in DecQ.
  • Xbox content and services revenue increased 34% yr/yr, down a tad from 40% growth in DecQ, however that was a holiday quarter.

 

Market Reaction to Q1 254.56 ▼ 7.41 (2.83%) Close April 28, 2021

Highlights

Last quarter MSFT saw an acceleration in growth in almost every area relative to its Q2 (Dec) results. In the company's Commercial business, accelerating digital transformations, as enabled by Microsoft Cloud, drove demand for its hybrid and cloud offerings. MSFT says Azure consumption, increased platform commitments, and higher usage of Teams and security offerings were key beneficiaries.

Within its small and medium business (SMB) segment, continued improvement in cloud purchasing trends offset transactional licensing weakness. LinkedIn improved with the job market. In its Consumer business, MSFT noted that Windows OEM and Microsoft 365 Consumer subscriptions benefited from a stronger than expected market for PCs, despite significant ongoing supply chain constraints.

An improving advertising market benefited its Search and LinkedIn businesses.

Gaming continued to see record engagement and strong monetization as demand exceeded supply for the company's Xbox Series X and S consoles.

Source: MSFT

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