Microsoft stock jumps as its cloud product’s sales double – CNBC
That’s compared to 62 cents a share in the year-earlier period, and a comparable year-ago revenue figure of $22.18 billion. Analysts expect Microsoft to report earnings of 58 cents per share on revenue of $22.15 billion, according to a Thomson Reuters consensus estimate.
Net income hit $3.1 billion, adjusted. Shares of the company popped more than 3 percent after the report.
“The Microsoft Cloud is seeing significant customer momentum and we’re well positioned to reach new opportunities in the year ahead,” CEO Satya Nadella said in a release.
Azure, Microsoft’s major cloud offering, saw revenue grow 102 percent (108 percent in constant currency) in the quarter, the company said.
For the entire intelligent cloud segment, revenues grew 7 percent (10 percent in constant currency) to $6.7 billion. Analysts had expected the segment to hit $6.61 billion in the fourth quarter, according to StreetAccount consensus.
The company’s Azure business was up 120 percent last quarter as Microsoft closes the gap with market leader Amazon. Analysts Sarah Hindlian and Frederick Havemeyer of Macquarie Capital, for instance, say they are “highly focused on any room for upside in this segment.”
“I think this is really a sign that big tech if finally getting to be a part of the game and what’s going on,” Tim Lesko,Granite Investment Advisors principal, said on CNBC’s “Closing Bell” on Tuesday. “That game is enterprise services over the Cloud. We’re pretty heartened that they’re really seeming to take the forefront rather than being a 5-year laggard in the business.”
Wall Street was watching for details on the uptake of Office 365, which includes services like Word, Excel, PowerPoint, and Outlook delivered over the internet across devices. A transition to a subscription-based business model is expected to accelerate sales growth
in coming years, Cowen & Co said earlier this year.
Office 365 commercial revenue saw growth of 54 percent (59 percent in constant currency), Microsoft said.
“I think it’s better than we thought, it was certainly what we were hoping for,” Julie Goodridge, CEO of Northstar Asset Management, who has a position in the company, told “Closing Bell” about the earnings.
It all comes amid cost-cutting at Microsoft’s money-losing phone business. By shuttering most of its hardware activities, Microsoft could save between $500 million and $800 million, said Stifel analyst Brad Reback.
Phone sales slid 71 percent (70 percent in constant currency) during the quarter, according to the report.
Microsoft’s earnings report marks its first since the announcement of its agreement to buy LinkedIn.
Though it’s too soon for LinkedIn to impact this quarter’s earnings, analysts will be listening for commentary regarding the rationale behind the deal, timing and integration of the social media platform’s rich array of data.
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Tim Lesko does not own Microsoft’s stock, but it is owned by clients.