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Microsoft Tops Estimates on Cloud Services Growth

Software and services giant also sees big gains at LinkedIn unit.
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Microsoft Corp.  (MSFT) - Get Microsoft Corporation (MSFT) Report topped fourth-quarter estimates for revenue and earnings after the bell Tuesday, helped by big gains at its Intelligent Cloud and LinkedIn operations.

The company reported diluted earnings per share of $2.17 on revenue of $46.2 billion.

Microsoft had been expected to report adjusted net income of $1.92 a share, on sales of $44.2 billion, based on a FactSet survey of 29 analysts.

In the same period a year ago, the company posted earnings of $1.46 a share on sales of $38 billion.

The software and cloud services giant said its results were helped in particular by strength in its Intelligent Cloud businesses where revenue rose 30%, year-over-year to $17.4 billion. Within the unit, Microsoft's Azure cloud computing revenue rose 51% year over year. The company said LinkedIn revenue rose 46%, helped by Marketing Solutions growth of 97%. 

“Our results show that when we execute well and meet customers’ needs in differentiated ways in large and growing markets, we generate growth, as we’ve seen in our commercial cloud -- and in new franchises we’ve built," Satya Nadella, chairman and chief executive officer of Microsoft, said in a statement. He noted that gaming, security, and LinkedIn, have all topped $10 billion in annual revenue over the past three years.

In the upcoming quarter analysts are forecasting adjusted net income of $14.8 billion, or $1.96 a share, on sales of $42.5 billion.

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For the year, analysts project revenue of $166.2 billion.

Microsoft is a holding in Jim Cramer's Action Alerts PLUS member club

Microsoft named CEO Satya Nadella as its chairman in June, bucking the trend in corporate governance to separate the two roles.

Last week Salesforce.com  (CRM) - Get salesforce.com, inc. Report completed its $27.7 billion acquisition of Slack Technologies, giving it a better tool to compete with Microsoft’s Teams app in the workplace software market which has surged in the past year thanks to remote working driven by COVID lockdowns.

Earlier this month the Department of Defense indicated it may split a huge cloud computing contract between Microsoft and Amazon.com AMZN. The $10 billion contract had originally been awarded to Microsoft. But Amazon protested that the Trump administration had interfered in the decision because of Trump’s animosity towards then Amazon CEO Jeff Bezos and the Washington Post, which Bezos owns.

Shares of Microsoft fell $6.82, or 2.4%, to $279.73 in after-hours trading. The stock fell 0.9% during the regular session on a down day for Wall Street. 

The stock has risen about 10% since the company last reported earnings on April 27.