MSFT Stock: Microsoft Edges Above Quarterly Targets On Cloud Growth

Microsoft (MSFT) shares fell on Wednesday when the software giant was well above Wall Street’s fiscal first-quarter targets, but far lower than views for the current period. MSFT stock fell over 7% on the news.


The Redmond, Wash.-based company said late Tuesday that it earned $2.35 per share on sales of $50.1 billion for the quarter ended Sept. Analysts polled by FactSet expected Microsoft earnings of $2.31 per share on sales of $49.7 billion. On a year-over-year basis, Microsoft’s earnings increased 4% as sales increased 11%.

Microsoft credits its cloud-computing services for better-than-expected results. However, its Azure infrastructure business grew at a slightly lower rate than expected.

“Microsoft Cloud revenue for the quarter was $25.7 billion, up 24% year over year (up 31% in constant currency),” Chief Financial Officer Amy Hood said in a news release. “We continue to see healthy demand in our commercial businesses, including another quarter of solid bookings, while providing attractive value for customers.”

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Microsoft stock dropped of late

For the current quarter, Microsoft expects sales of $52.35 billion to $52.35 billion. The midpoint of $52.85 billion was well below Wall Street’s target of $56.2 billion for the December quarter.

In the stock market this morning, the share of MSFT fell 7.1% to 232.80 in the morning trade. MSFT stock closed 1.4% higher at 250.66 during the regular session on Tuesday.

Among Microsoft’s three business segments, Intelligent Cloud was the top performer in the September quarter. Revenue in the segment grew 20% year over year to $20.3 billion. The unit includes server products and cloud services such as Azure.

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Microsoft’s productivity and business process unit sales rose 9% to $16.5 billion. This division includes office productivity software as well as Dynamics and LinkedIn Business.

Microsoft’s more personal computing unit was a laggard, with revenues falling by $13.3 billion. The unit includes Windows PC software, Xbox video games, Surface computers, Internet search and advertising.

MSFT ranks first in the stock group

Prior to Microsoft’s earnings report, analysts expressed concerns that a weak personal computer market would hinder its results.

Another PC-focused stock, Logitech International (LOGI), rose on Tuesday as the peripherals maker matched Wall Street’s earnings target for the September quarter and maintained its sales and earnings targets for fiscal 2023. However, sales declined in the September quarter as forex rates were cut.

Logitech’s stock jumped 11% to 50.64 on Tuesday.

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According to IBD Stock Checkup, MSFT stock ranks first out of seven stocks in IBD’s computer software-desktop industry group. But it has an IBD overall rating of 65 out of 99.

IBD’s overall rating combines five different proprietary ratings into one easy-to-use rating. The best growth stocks have a composite rating of 90 or better.

follow patrick setz on twitter @IBD_PSeitz For more stories on consumer technology, software and semiconductor stocks.

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