Microsoft stock rebounds on strong earnings and outlook

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Investors will be watching for news regarding Microsoft’s purchase of Activision Blizzard.

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provides tech investors with badly needed good news, announcing better-than-expected results for its third fiscal quarter ended March 31.

After some initial volatility, the stock trades higher after hours. It is boosted by a good outlook for the June quarter, although Microsoft has expressed some concerns about the Covid shutdowns at Chinese factories affecting hardware.

For the March quarter, Microsoft (ticker: MSFT) reported revenue of $49.4 billion, up 18% from a year ago, and well above the consensus forecast of Wall Street by $47.5 billion. The company earned $2.22 per share in the quarter, beating the Wall Street consensus of three cents per share.

Microsoft noted that earnings were hurt about three cents per share by unfavorable exchange rates, while the recent acquisition of Nuance Communications cut earnings by about one cent per share. None of these factors were reflected in the company’s previous guidelines. Microsoft has suspended new sales in Russia, but the company has previously said sales in the country account for well under 1% of the company’s total revenue.

Microsoft said commercial bookings in the quarter were better than expected, up 28% from a year ago, or 35% adjusted for currency. The company’s commercial cloud business, which includes Azure, Office 365 Commercial, LinkedIn’s commercial business and Dynamics 365, generated combined revenue of $23.4 billion, up 32%.

Microsoft achieved strong results in all three of its business segments.

Revenue for the Productivity and Business Processes segment, which includes Office and other applications, was $15.8 billion, up 17%, near the top of the forecast range. company from $15.6 billion to $15.85 billion, and just ahead of the Wall Street consensus for $15.75 billion. .

For the Intelligent Cloud segment, which includes the company’s Azure cloud business, revenue was $19.1 billion, up 26%, ahead of both the company’s guidance range of 18 $.75 billion and $19 billion, and the Wall Street consensus at $18.89 billion. The company’s Azure cloud computing business grew 46% in the quarter, or 49% in constant currency.

For the More Personal Computing segment, which includes Windows, Surface and Xbox, revenue was $14.5, also ahead of the company’s guidance range of $14.15 billion to $14.45 billion and on Wall Street forecast of $14.3 billion.

Revenue increased 34% at LinkedIn, while search and new ad revenue excluding traffic acquisition costs increased 23%. Microsoft does not routinely disclose the size of its overall advertising business; Last quarter, the company noted that year-over-year combined ad business exceeded $10 billion.

Surface hardware revenue increased 13%, while Xbox hardware revenue increased 14%. Windows commercial product revenue increased 14%, while Windows OEM revenue, from retail PC sales, increased 11%. Desktop commercial products increased 12%, while desktop consumer revenues increased 11%.

In a conference call with investors, Chief Financial Officer Amy Hood predicted better-than-expected results for the June quarter.

It projects revenue for the Productivity and Business Processes segment of the company between $16.65 billion and $16.9 billion, in the middle of the range ahead of Street’s consensus at $16.68 billion. For Intelligent Cloud, it forecast revenue between $21.1 billion and $21.35 billion, ahead of consensus at $20.9 billion.

For the More Personal Computing segment, it forecast a range of $14.65 billion to $14.95 billion, slightly below Street’s consensus of $14.96 billion, reflecting current manufacturing shutdowns related to Covid in China, affecting both Surface and Xbox hardware, and software sales to computer makers.

Overall, the segment forecast implies a total revenue range of $52.4 billion to $53.2 billion, about halfway in line with Street’s estimates.

Hood said currency headwinds would reduce revenue in the quarter by about 2 percentage points. She also noted that the June results will include a full quarter of results from Nuance. Hood added that results would be cut by about $110 million by suspending sales in Russia.

Microsoft said it repurchased $7.8 billion of its common stock during the quarter.

In volatile after-hours trading, Microsoft shares rose 6%, after falling 3.7% in Tuesday’s regular session.

Before the earnings report tonight, Microsoft shares were down about 20% year-to-date.

Write to Eric J. Savitz at [email protected]

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