Microsoft Earnings: What Impressed The Most

Microsoft delivered excellent earnings results in the second fiscal quarter. The Apple Maven reviews Microsoft’s top three key highlights from the earnings results, and counts down to what was most impressive.
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On Tuesday, January 26, Microsoft delivered solid fiscal quarter results. The Apple Maven covered the full results and live call.

Below I listed the top three highlights from Microsoft earnings results:

3. Azure trending in the right direction

Intelligent cloud revenues came in at $14.6 billion, around 7% above guidance. Azure up 50% (48% in constant currency) on improved customer spending. Not extraordinary, but certainly not bad whatsoever. 

Check out the graph below. It shows the quarter-to-quarter acceleration or deceleration in the year-over-year growth rate, all in constant currency. The numbers represent percentage points.

Azure Quarter-To-Quarter Acceleration in Growth Rates

Azure Quarter-To-Quarter Acceleration in Growth Rates

I would say that Azure growth is trending in the right direction, after a disappointing first calendar quarter of 2020 that was disrupted by the very early stages of the COVID-19 crisis.

In Intelligent Cloud, what excites me is the gain of scale leading to even larger operating income. This is expected of a capex-heavy business like cloud (i.e. lots of large fixed costs that get better "diluted" with the rapid increase in revenues). Cloud segment revenues were up 23%, but operating income was up 43%

Microsoft Azure

Microsoft Azure

2. Gaming... a success

Gaming has surpassed $5 billion in revenues for the first time ever. New XBox is the most successful launch ever. Microsoft reports console share gain (e.g. over PlayStation). Revenues grew 51%. 

This is a huge improvement over the previous quarter's 22%. XBox hardware sales alone were up 86%.

XBOX controller.

XBox Controller

1. PC was the big story

As the Apple Maven had anticipated, PC was a crucial driver of revenue upside to estimates and guidance. It was probably the most important segment during a quarter of strong PC sales across the whole industry and the long- awaited XBox refresh.

Personal computing revenues landed at $15.1 billion, which was about 13% above guidance.

It was a killer quarter for this segment, stronger across all sub-businesses. Continued demand for Microsoft 365 and security. Surface looked fine as well, given the device's growth limitations.

Microsoft Surface Pro

Microsoft Surface Pro

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