Microsoft Corp. rode better-than-expected growth in its Azure cloud-computing unit to sizable revenue and earnings beats Tuesday, and its shares were advancing more than 4% in the aftermarket.
The company said revenue for Azure and other cloud services was up 29%, or 28% in constant currency in the fiscal first quarter. Microsoft’s
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forecast had been for 25% to 26% constant-currency Azure revenue growth, while the company posted 27% constant-currency growth on the metric in the June period. The FactSet consensus called for 25.6% growth in constant currency.
Microsoft’s cloud-computing unit, dubbed Intelligent Cloud, saw a 19% bump in revenue to $24.3 billion. Analysts were looking for $23.5 billion.
“While the focus now shifts to the drivers behind these results, including whether or not we are past the Azure ‘bottom’ or whether there were one-time items that resulted in the beat, we believe that the narrative gets even stronger into the rest of FY24 as some optical headwinds reverse and [comparisons] soften, and Microsoft’s position in the enterprise market continues to get stronger as customers look to consolidate spending,” Evercore ISI analyst Kirk Materne wrote in a note to clients.
Overall revenue rose to $56.5 billion from $50.1 billion a year before, while analysts were modeling $54.5 billion. The 12% growth on a constant-currency basis prompted Jefferies analyst Brent Thill to title his note to clients: “Double Digit Growth Without AI? Stay Long.”
The company logged September-quarter net income of $22.3 billion, or $2.99 a share, whereas it earned $17.6 billion, or $2.35 a share, in the year-prior period. Analysts tracked by FactSet were expecting $2.65 in earnings per share.
Microsoft recorded $18.6 billion in revenue for its productivity and business processes unit, up 13% from a year earlier, or up 12% on a constant-currency. That segment of the business includes LinkedIn and Office. Analysts had been looking for $18.2 billion in segment revenue.
Revenue for Microsoft’s More Personal Computing segment, which houses Windows and Xbox content and services, rose 3% to $13.7 billion and was up 2% on a constant-currency basis. The FactSet consensus called for $12.9 billion.
The company said it would provide forward guidance on the earnings call, which begins at 5:30 p.m. Eastern time.
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