Microsoft Corp hit Wall Street targets for cloud services revenue, but that was not enough for some of the most optimistic investors and shares fell 5% in extended trade.
Total revenue beat expectations but the outperformance did not flow through to the Azure cloud service. Azure revenue growth of 46% was in line with analyst expectations as compiled by Visible Alpha. The stock dropped in part because Azure revenue did not hit an unofficial Wall Street bullish forecast of 48%, Wedbush analyst Dan Ives said in a note.
“It all comes down to guidance on the call, this will be the focus for the Street to gauge broader enterprise/cloud spending into the rest of 2022 in this white knuckle backdrop,” he wrote.
Ives called Microsoft’s performance “robust” and a sign that the company “is continuing to see strength in the field”.
Microsoft has become one of the most valuable companies in the world https://www.reuters.com/technology/apple-set-hand-crown-worlds-most-valuable-company-microsoft-2021-10-29 by betting heavily on corporate software and services, especially its cloud services and the movement to the Web of its Outlook email and calendar software, known as Office 365.
The switch to working and learning from home during the pandemic also attracted more users to Microsoft’s office communication software and services such as Teams and Office 365. And demand for cloud services from Microsoft and rivals Amazon.com Inc and Alphabet Inc surged as the pandemic outbreak accelerated a shift online.
Revenue from Microsoft’s biggest segment, which offers cloud services and includes Azure, its flagship cloud offering, rose 26%, while the business that houses its Office 365 services increased 19% in the quarter.
Net income rose to $18.77 billion, or $2.48 per share, from $15.46 billion, or $2.03 per share, a year earlier.
The company said revenue rose to $51.73 billion in the three months ended Dec. 31, from $43.08 billion a year earlier.
Analysts on average had expected revenue of $50.88 billion, according to Refinitiv data.
Investors are also focused on Microsoft’s proposed $69 billion acquisition of Activision Blizzard Inc, announced on Jan. 18, a huge expansion for its gaming division. It also broadens the company’s efforts in the so-called metaverse, or the merging of online and offline worlds, which will have corporate and consumer applications.
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