Microsoft sent shockwaves through the financial world with an exceptional Q1 earnings report, propelling its shares up by as much as 6% in after-hours trading. The tech giant’s remarkable performance was marked by impressive earnings per share and revenue figures that outshone Wall Street’s expectations.
Here’s a closer look at Microsoft’s Q1 results compared to analyst predictions:
- Earnings per share: Microsoft reported $2.99 per share, surpassing the $2.65 per share expected by analysts.
- Revenue: The company’s revenue for the quarter amounted to $56.52 billion, exceeding the $54.50 billion forecasted by analysts.
Guidance from Amy Hood, Microsoft’s finance chief, painted a positive outlook for the future. She announced a fiscal second-quarter revenue projection ranging from $60.4 billion to $61.4 billion, implying a robust 15% growth. In contrast, analysts polled by Refinitiv had anticipated revenue of $60.9 billion.
In comparison to the previous year, revenue exhibited substantial growth, climbing almost 13% from $50.12 billion in the same quarter. Microsoft’s net income surged by 27%, reaching $22.29 billion, or $2.99 per share, compared to $17.56 billion in the corresponding quarter the previous year.
The Intelligent Cloud segment was a standout performer, recording $24.26 billion in revenue, marking a remarkable 19% increase and surpassing the $23.49 billion consensus among analysts. This segment comprises several pivotal components, including the Azure public cloud, SQL Server, Windows Server, Visual Studio, Nuance, GitHub, and enterprise services. Azure revenue alone experienced a notable 29% increase during the quarter, exceeding the 26% consensus among analysts.
Microsoft doesn’t disclose Azure revenue in dollars, but it reported a 28% growth in Azure revenue at constant currency, which marked an acceleration from the 27% growth observed in the fiscal fourth quarter. Looking ahead, Microsoft anticipates Azure growth to remain stable at constant currency, maintaining a range of 26% to 27% in the second half of the fiscal year, with an increasing contribution from artificial intelligence.
CEO Satya Nadella emphasized Microsoft’s role in helping customers maximize the value of their digital investments through the Microsoft Cloud, promoting operating leverage. This trend aligns with clients seeking cost-effective solutions for their cloud spending, reflecting a pattern observed by several large cloud infrastructure providers in recent quarters.
In addition to Azure’s remarkable performance, the Productivity and Business Processes unit reported $18.59 billion in revenue, reflecting a solid 13% increase, surpassing StreetAccount’s consensus of $18.19 billion. This unit encompasses Microsoft 365 productivity app subscriptions, LinkedIn, and Dynamics enterprise software. Notably, the Teams communication app has achieved a significant milestone, with more than 320 million monthly active users, a substantial increase from 300 million six months ago.
The More Personal Computing segment, which includes Windows, Xbox, Bing, and Surface, contributed $13.67 billion in revenue. This marked a 3% increase and exceeded StreetAccount’s consensus of $12.85 billion. Particularly noteworthy is the 4% growth in sales of Windows operating-system licenses to device makers, signifying a positive shift in the PC market, which has begun to stabilize.
Microsoft’s disciplined approach to managing growth in research and development and sales and marketing costs was evident, with operating expenses increasing by 1.3%, the slowest rate since 2016. Looking ahead, management forecasts approximately 5% growth for the fiscal second quarter.
During the quarter, Microsoft introduced new cybersecurity services, announced the launch of new Surface PCs, and revealed plans to offer the Microsoft 365 Copilot AI add-on to enterprises starting November 1.
Moreover, Microsoft recently concluded its $68.7 billion acquisition of video game publisher Activision Blizzard. Although this acquisition isn’t reflected in Microsoft’s Q1 results, it will likely impact future earnings, making it a topic of discussion when providing guidance for the next quarter.
Despite the stock’s surge in after-hours trading, it’s essential to recognize that Microsoft stock has seen a phenomenal 38% increase this year, outpacing the S&P 500 index, which has grown approximately 11% during the same period. This robust growth underscores Microsoft’s strength and resilience in the ever-evolving tech industry.
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