Microsoft
shares were trading higher after the company posted better-than-expected financial results for its September quarter, aided by better performance than expected from the company’s cloud computing business.
The software firm posted revenue of $56.5 billion, up 13% from a year ago, and $2 billion ahead of Wall Street estimates.
Profits were $2.99 a share, well ahead of the consensus of $2.65 a share. Importantly, the company’s Azure cloud business grew 28% on a constant currency basis in the quarter, well above the company’s forecast for growth of 25% to 26%; on a GAAP basis Azure grew 29%. The company said Microsoft Cloud revenue was $31.8 billion, up 24%.
Microsoft shares were up 3.5% in late trading following the report.
In the quarter, the company posted revenue of $18.6 billion for its Productivity and Business Processes segment, up 13% from a year ago, and ahead of its guidance range of $18 billion to $18.3 billion. That includes 15% growth in Office Commercial products.
Microsoft said its Intelligent Cloud segment, which includes Azure, had revenue of $24.3 billion, up 19%, and well ahead of its forecast range of $23.3 billion to $23.6 billion. Server products and cloud services revenue was up 21%.
Revenue from the More Personal Computing segment was $13.7 billion, up 3%, and nicely above the guidance range of $12.5 billion to $12.9 billion. Search and news advertising revenue excluding traffic acquisition costs rose 10%. One big surprise in the quarter was that Windows OEM revenue—paid by PC manufacturers—was up 4%. The company’s guidance had called for a decline in the low-to-mid teens.
The company said commercial bookings in the quarter were up 14%, or 17% adjusted for currency.
Microsoft repurchased $3.6 billion of common stock in the quarter.
Microsoft shares have surged 36% in 2023, amid investor excitement about the company’s substantial investment in OpenAI, its integration of AI software into Bing, and its rollout of AI Copilot software across its software lineup.
For the December quarter, Wall Street is forecasting overall sales of $58.7 billion, with profits of $2.66 a share, but those estimates likely don’t reflect expected contributions from Microsoft’s recently completed acquisition of Activision.
On Tuesday’s call with analysts, Microsoft CFO Amy Hood said the company sees December quarter revenue in Intelligent Cloud up 17% to 18%, ranging from $25.1 billion to $25.4 billion, ahead of Street consensus at $25 billion. The company sees Azure growth in the quarter up 26% to 27% on a constant currency basis in the quarter. The stock slipped a hair in late trading on the Azure forecast, which suggests moderating growth from the September quarter.
For the Productivity and Business Processes segment, Hood projects revenue growth of 11% to 12%, to between $18.8 billion and $19.1 billion; at the midpoint that tops the old Street consensus forecast at $18.8 billion.
The company expects bookings to be flat on a year-over-year basis in the quarter. Hood also said that for the June 2024 fiscal year, she continues to see flat year-over-year operating margins, including costs related to the Activision purchase.
For More Personal Computing, the company sees revenue ranging from $16.5 billion to $16.9 billion, including the recently acquired Activision business.
Write to Eric J. Savitz at eric.savitz@barrons.com
Read the full article here
