Microsoft profit pops 27% as Azure growth accelerates

Microsoft Microsoft shares jumped as much as 5% in extended trading on Tuesday after the software maker issued fiscal first-quarter results that beat Wall Street estimates. The firm also reported a surge in profit thanks to a slower pace of operating expense growth.

Here’s how the company did, compared with estimates from analysts surveyed by LSEG, formally known as Refinitiv:

• Earnings: $2.99 per share, vs. $2.65 per share.
• Revenue: $56.52 billion, vs. $54.50 billion.

Revenue grew 13% year over year in the quarter from $50.12 billion in the year-ago quarter, according to a statement. Net income, at $22.29 billion, increased 27% from $17.56 billion, or $2.35 per share in the same quarter a year ago.

Microsoft’s Intelligent Cloud segment produced $24.26 billion in revenue, up 19% and above the $23.49 billion consensus among analysts surveyed by StreetAccount. The unit comprises the Azure public cloud, SQL Server, Windows Server, Visual Studio, Nuance, GitHub and enterprise services.

Revenue just from Azure jumped 29% during the quarter, faster than the 26% consensus among analysts that CNBC and StreetAccount polled. Microsoft doesn’t disclose Azure revenue in dollars. At constant currency, Azure revenue rose 28%, accelerating from 27% in the fiscal fourth quarter. 

Microsoft is “still helping customers use the Microsoft Cloud to get the most value out of their digital spend, and driving operating leverage,” CEO Satya Nadella said in the earnings release.

The Productivity and Business Processes unit posted $18.59 billion in revenue, which was up 13% and more than StreetAccount’s $18.19 billion consensus. The unit contains Microsoft 365 productivity app subscriptions, LinkedIn and Dynamics enterprise software.

Microsoft’s More Personal Computing segment featuring Windows, Xbox, Bing and Surface contributed $13.67 billion in revenue. That was up 3% and higher than the $12.85 billion StreetAccount consensus.

The company reported 4% growth in sales of Windows operating-system licenses to device makers, ending a streak of five quarters of year-over-year declines. The PC market has started to stabilize, with shipments down 9% in the third quarter, compared with a 30% decline in the first quarter, according to estimates from technology industry researcher Gartner.

Microsoft continued to slow its growth in research and development and sales and marketing costs. Operating expenses increased 1.3%, the slowest rate since 2016.

During the quarter, Microsoft introduced fresh cybersecurity services, announced new Surface PCs and said it would sell its Microsoft 365 Copilot AI add-on to enterprises starting Nov. 1.

Earlier this month, Microsoft completed its $68.7 billion acquisition of video game publisher Activision Blizzard. While Activision isn’t incorporated into Microsoft’s fiscal first-quarter results, it will partly affect earnings for the next quarter, so executives will likely discuss it when providing guidance.

Notwithstanding the after-hours move, Microsoft stock is up 38% so far this year, while the S&P 500 index is up about 11% over the same period.

Executives will discuss the results with analysts and issue guidance on a conference call starting at 5:30 p.m. ET.

This is breaking news. Please check back for updates.

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