Microsoft Blasts Q2 Earnings Forecast on Cloud, PC Strength; Shares Leap

Microsoft CEO Satya Nadella said second quarter earnings mark the "dawn of a second wave of digital transformation sweeping every company and every industry."
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Microsoft Corp.  (MSFT) - Get Report posted much stronger-than-expected second quarter earnings Tuesday thanks in part to a surge in cloud revenues and a big jump on personal computer sales.

Microsoft said profits for the three months ending in December, the company's fiscal second quarter, came in at $2.03 per share, a 34% increase from the same period last year and well ahead of the Street consensus forecast of $1.64 per share. Group revenues, Microsoft said, rose 17% to $43.1 billion, again topping analysts' estimates of  $40.2 billion tally.

Intelligent Cloud revenues rose 23% from last year and were pegged at $14.6 billion, Microsoft said, with server products and cloud services sales rising 26%, driven by a 50% surge in revenues for Azure, Microsoft's benchmark cloud offering. Personal computing revenues rose 14% to $15.1 billion, Microsoft said, amid the ongoing 'work-from-home' shift in major economies around the world, while Linkedin revenues were up 23% and XBox content revenues increased by 40%.

Looking into the current quarter, Microsoft said it sees Intelligent Cloud revenues of between $14.7 billion and $14.95 billion, with Personal Computing sales in the range of $12.3 billion to $12.7 billion. Productivity and Business Process revenues were forecast at $13.35 billion to $13.6 billion.

“What we have witnessed over the past year is the dawn of a second wave of digital transformation sweeping every company and every industry,” said CEO Satya Nadella. “Building their own digital capability is the new currency driving every organization’s resilience and growth. Microsoft is powering this shift with the world’s largest and most comprehensive cloud platform.”

“Accelerating demand for our differentiated offerings drove commercial cloud revenue to $16.7 billion, up 34% year over year,” said Amy Hood, executive vice president and chief financial officer of Microsoft. “We continue to benefit from our investments in strategic, high-growth areas.”

Microsoft shares were marked 5.3% higher in after-market trading immediately following the earnings release to indicate a Wednesday opening bell price of $244.60 each, a move that would extend the stock's six-month gain to around 22%.