Microsoft Delivers Better Earnings Results but Weak Q4 Outlook Pulls MSFT Stock Down

UTC by Bhushan Akolkar · 2 min read
Microsoft Delivers Better Earnings Results but Weak Q4 Outlook Pulls MSFT Stock Down
Photo: Depositphotos

For the September quarter, Microsoft managed to comfortably beat Street estimates driven by a significant surge in the demand for its Azure cloud and software services.

On Tuesday, October 27, software and computing giant Microsoft Corporation (NASDAQ: MSFT) announced its September quarter results beating Street estimates. The company’s cloud computing division helped to boost its revenue beyond analysts’ expectations.

Microsoft reported earnings of $1.82 per share with a total revenue sales of $37.5 billion. This was above the expected earnings of $1.54 a share and sales of $35.72 billion. On a YoY basis, the company’s jumped a whopping 32% against the expected 12%. During the earnings call, Chief Financial Officer Amy Hood said:

“Demand for our cloud offerings drove a strong start to the fiscal year with our commercial cloud revenue generating $15.2 billion, up 31% year over year. We continue to invest against the significant opportunity ahead of us to drive long-term growth.”

In the September quarter revenue for Microsoft’s Intelligent Cloud segment jumped 20% to $13 billion. The Azure cloud services and server software helped to drive the gains further. Although the Azure services registered revenue growth of 48% below Wall Street’s estimates of 50%. It looks like the momentum has been cooling down, unlike the previous quarters.

Microsoft’s revenue for the Productivity and Business Process segment jumped 11% to $12.3 billion. Also, the revenue in its Personal Computing segment surged 6% to $11.8 billion.

Despite Good Results, Weak Q4 Outlook Pulls Microsoft Stock Down

The MSFT stock took a dip in the after-hours trading on Tuesday as the quarterly revenue guidance for Q4 2020 fell short of analysts’ expectations. Amy Hood said that Microsoft expects $39.5 billion to $40.4 billion in revenue during the last quarter. This is slightly below the Wall Street estimates of $40.43 billion.

On Tuesday closing, the MSFT stock was trading 1.51% up at $213 with a market cap of $1.61 trillion. Microsoft (MSFT) has been one of the top performers on Wall Street and is trading at a 35% premium year-to-date.

The last quarter had been considerably busy for the company. Earlier in August, the company was actively involved in discussions of acquiring the U.S. TikTok operations. However, it later lost the deal to Oracle Corporation (NYSE: ORCL) and Walmart Inc (NYSE: WMT).

Later in September, Microsoft announced the acquisition of ZeniMax Media in a $7.5 billion deal. This deal further extends Microsoft’s dominance in the gaming industry giving it complete access to the very popular Fallout Franchise. With its Xbox model, the company is also expecting a strong gaming revenue in the coming quarters.

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