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Microsoft Stock: Software Giant Beats Views On Cloud Strength

software power house microsoft (MSFT) saw its shares jump Wednesday after the company beat expectations for its fiscal third quarter on strong cloud computing business. Microsoft stock surged over 4% in heavy trading volume on the news.




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The Redmond, Wash.-based company late Tuesday said it earned $2.22 a share on sales of $49.4 billion in the quarter ended March 31. Wall Street had expected Microsoft earnings of $2.19 a share on sales of $49 billion, according to FactSet. On a year-over-year basis, Microsoft earnings rose 14% while sales climbed 18%.

“Continued customer commitment to our cloud platform and strong sales execution drove better-than-expected commercial bookings growth of 28% and Microsoft Cloud revenue of $23.4 billion, up 32% year over year,” Chief Financial Officer Amy Hood said in a news release.

For the current quarter, Microsoft expects to generate sales of $52.8 billion, based on the midpoint of its guidance. That matches Wall Street’s target for the June quarter. In the year-earlier period, it posted $46.2 billion in sales.

Intelligent Cloud Unit Is Top Performer

on the stock market today, Microsoft stock jumped 4.8% to close at 283.22. During the regular session Tuesday, Microsoft stock fell 3.7% to 270.22 amid a broad market sell-off.

Of Microsoft’s three business segments, Intelligent Cloud was the top performer in the March quarter. Revenue in the segment increased 26% year over year to $19.1 billion. The unit includes server products and cloud services such as Azure infrastructure offerings.

Microsoft’s Productivity and Business Processes unit saw sales rise 17% to $15.8 billion. The division includes Office productivity software as well as the Dynamics and LinkedIn businesses.

And lastly, Microsoft’s More Personal Computing unit posted an 11% increase in sales to $14.5 billion in the fiscal third quarter. The unit includes Windows software, Xbox video games, Surface computers, internet search and advertising.

Accelerating Azure Sales

An acceleration in Microsoft’s Azure sales excited investors, Oppenheimer analyst Timothy Horan said in a note to clients. He rates Microsoft stock as outperform with a price target of 340.

“The key metric that moves the stock, Azure Cloud revenue, accelerated to 49% constant-currency growth from 46%,” Horan said. It was the unit’s fastest growth in two years and on double the revenue base, he said.

Also, Azure guidance for the current quarter is strong, moderating only slightly from its current “torrid pace,” he said. Microsoft guided to 47% growth in Azure sales in the June quarter.

Azure competes with amazon‘s (AMZN) Amazon Web Services in the cloud infrastructure services market.

Microsoft Stock On 2 IBD Stock Lists

Microsoft stock is on IBD’s leader board list. It is also in the IBD Long-Term Leaders Portfolio.

Microsoft stock has been consolidation for the past 23 weeks with a buy point of 349.77, according to IBD MarketSmith charts. That buy point is 10 cents above its all-time high of 349.67, reached on Nov. 22, based on IBD trading principles. It retreated 23% during the recent stock market correction.

Microsoft stock has a so-so IBD Composite Rating of 78 out of 99, according to IBD Stock Checkup. IBD’s Composite Rating is a blend of key fundamental and technical metrics to help investors gauge a stock’s strengths. The best growth stocks have a Composite Rating of 90 or better.

Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.

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