Microsoft Corporation (NASDAQ:MSFT) reported Q3 numbers on Wednesday, assuming a part of the category we might call “The Good” in “The Good, the Bad, and the Ugly” for this earnings season. That judgment is about both the technical action (holding the $100/share level and 200-day simple moving average off the report) and the fact that, as we pick through the data, we see strength across all categories and EBITDA margin jumping by more than 2%. That’s exactly what the market wanted to see.
At a time when most every large and mega-cap tech stock has been getting hammered, MSFT is basically flat over the past two weeks. Cloud continues to be a key driver and now the company has started to bundle a lot of its packages. That’s helping legacy demand. In addition, the high CapEx is a vote of confidence. Again, this comes in a context of index-based selling focused on Nasdaq 100 stocks. That implies natural pressure on the biggest components, such as MSFT, that has nothing to do with evaluating this company in its own right. So, flat off these earnings is a strong reaction to a strong report.
Microsoft Corporation (NASDAQ:MSFT) frames itself as a company that develops, licenses, and supports software, services, devices, and solutions worldwide.
Its company’s Productivity and Business Processes segment offers Office 365 commercial products and services for businesses, such as Office, Exchange, SharePoint, Skype for Business, Microsoft Teams, and related Client Access Licenses (CALs); Office 365 consumer services, including Skype, Outlook.com, and OneDrive; LinkedIn online professional network; and Dynamics business solutions comprising financial management, enterprise resource planning, customer relationship management, supply chain management, and analytics applications for small and medium businesses, large organizations, and divisions of enterprises.
The company’s Intelligent Cloud segment licenses server products and cloud services, such as SQL Server, Windows Server, Visual Studio, System Center, and related CALs, as well as Azure, a cloud platform; enterprise services, including premier support and Microsoft consulting services to assist customers in developing, deploying, and managing Microsoft server and desktop solutions, as well as providing training and certification to developers and IT professionals on Microsoft products. Its More Personal Computing segment offers Windows OEM, volume, and other non-volume licensing of the Windows operating system; patent licensing, Windows Internet of Things, and MSN display advertising; devices comprising Surface, PC accessories, and other intelligent devices; Xbox hardware and software and services; and Bing and Bing Ads search advertising.
The company markets and distributes its products through original equipment manufacturers, distributors, and resellers, as well as through online and Microsoft retail stores. Microsoft Corporation has collaboration with E.ON to develop smart connected home solutions.
Data in the Raw
As noted above, MSFT just hit the market with Q3 data that were strong basically from top to bottom. The raw report came through as follows:
Reports Q1 (Sep) earnings of $1.14 per share, $0.18 better than the S&P Capital IQ Consensus of $0.96; revenues rose 18.5% year/year to $29.08 bln vs the $27.92 bln S&P Capital IQ Consensus.
Revenue in Productivity and Business Processes was $9.8 billion and increased 19% vs. $9.25-9.45B guidance, with the following business highlights:
Office commercial products and cloud services revenue increased 17% (up 16% in constant currency) driven by Office 365 commercial revenue growth of 36% (up 35% in constant currency) • Office consumer products and cloud services revenue increased 16% (up 17% in constant currency) with continued growth in Office 365 consumer subscribers to 32.5 million • LinkedIn revenue increased 33% (up 33% in constant currency) with record levels of engagement highlighted by LinkedIn sessions growth of 34% • Dynamics products and cloud services revenue increased 20% (up 20% in constant currency) driven by Dynamics 365 revenue growth of 51% (up 49% in constant currency)
Revenue in Intelligent Cloud was $8.6 billion and increased 24% vs. $8.15-8.35 bln guidance, with the following business highlights:
Server products and cloud services revenue increased 28% (up 28% in constant currency) driven by Azure revenue growth of 76% (up 76% in constant currency) • Enterprise Services revenue increased 6% (up 6% in constant currency)
Revenue in More Personal Computing was $10.7 billion and increased 15% vs. $9.95-10.25 bln guidance, with the following business highlights:
Windows OEM revenue increased 3% (up 3% in constant currency) driven by OEM Pro revenue growth of 8% Windows commercial products and cloud services revenue increased 12% (up 12% in constant currency) driven by an increased volume of multi-year agreements • Gaming revenue increased 44% (up 45% in constant currency) with Xbox software and services revenue growth of 36% (up 36% in constant currency) mainly from third-party title strength.