Microsoft stock rises after cloud-powered earnings beat
Microsoft Corp. stock rose more than 4% in the extended session Wednesday after the company’s cloud divisions pushed the software giant to a top- and bottom-line earnings beat.
The Redmond, Wash.-based company reported profit well above what Wall Street had expected, posting a net income jump of 34% to $8.8 billion, which amounts to earnings of $1.14 a share. Analysts polled by FactSet had expected net income of $7.46 billion, or 94 cents a share. Sales also topped expectations, up 19% to $29.08 billion compared with the year-earlier period.
Shares in the tech giant rose 4.3% in the extended session after closing down 5.4% to $102.32 during the regular session. Microsoft MSFT, -5.35% stock has gained 19% this year, as the S&P 500 index SPX, -3.09% rose 2.5%.
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Microsoft continues to benefit from public cloud adoption and the company’s Azure division, which includes several components of its cloud computing platform, grew 76% compared with the year-earlier period, more than any other segment the company broke out in its initial earnings release.
“Microsoft just delivered an eye-popping cloud beat and a performance that speaks to a secular cloud story which is still in the early innings of playing out and supports our thesis that core enterprise cloud spending is actually accelerating into 2019 with Redmond front and center along with [Amazon Web Services] in this two horse race,” wrote Wedbush analyst Dan Ives in a note to clients late Wednesday.
Microsoft Chief Financial Officer Amy Hood credited the quarter to the company’s big, long-term bets as well as the company’s cloud products. Microsoft said that its Intelligent Cloud segment grew 24% to $8.6 billion, compared with the year-earlier quarter. Productivity and Business Processes recorded $9.8 billion in first-quarter revenue and More Personal Computing accounted for $10.7 billion in sales.
Cloud growth comes at a price, however. Microsoft said that its capital expenditures for the quarter included $4.3 billion which was in part used to support assets and leases to support its growing cloud operations. It spent $3.6 billion in cash on property and equipment for the quarter.
“Microsoft continues to execute on key strategies like hybrid cloud,” Forrester analyst Christopher Voce wrote in an email. “Positive Azure and Office365 results are indicators that it’s doing well in its cloud strategy; despite the slowed growth. It’s hybrid cloud strategy has resonated with enterprises where this is a more realistic and flexible approach.”
Gaming sales grew 44% to $2.74 billion and revenue from the company’s LinkedIn social network grew 33% to $1.53 billion. On the earnings conference call executives said that gaming revenue continued to benefit from “a third-party title.”
Microsoft executives said the company expects fiscal second-quarter revenue of $31.9 billion to $32.7 billion. Analysts polled by FactSet had modelled second quarter sales of $32.21 billion.
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