Microsoft Cloud Growth Drives Strong Q3 FY2019 Results

Earnings and revenue beat estimates, boosting stock value slightly

Subscription News: Microsoft Cloud Growth Drives Strong Q3 FY2019 Results

Source: Microsoft

On Wednesday, Microsoft (NASDAQ: MSFT) reported strong third quarter results, driven by cloud growth, for fiscal year 2019 for the period ended March 31, 2019. Total revenue for the quarter was $30.6 billion, a 14% increase year-over-year. Other highlights include operating income of $10.3 billion, a 25% increase year-over-year, and net income of $8.8 billion, a 19% increase year-over-year, or diluted earnings per share of $1.14, representing a 20% year-over-year increase. Analysts were expecting revenue of $29.84 billion and earnings of $1.00 earnings per share, reports CNBC.

It was another strong quarter with double-digit top-line and bottom-line growth, the result of picking the right secular trends, accelerating innovation and most importantly, relentlessly focusing on our customers success, said Microsoft CEO Satya Nadella during the earnings call.

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Our trusted, extensible cloud platform spanning application infrastructure, data & AI, productivity and collaboration, as well as business applications enables every organization to create their own intelligent systems and experiences to compete and grow, Nadella added.

Other financial highlights for the quarter include:

– Revenue for Productivity and Business Processes was $10.2 billion, a 10% increase year-over-year.

– Office Commercial products and cloud services grew 8% year-over-year and Microsoft now has 34.2 million subscribers to Office 365.

– LinkedIn revenue grew 27% year-over-year.

– Dynamics products and cloud services revenue grew 13% year-over-year, driven by Dynamics 365 revenue growth of 43% year-over-year.

– Revenue for Intelligent Cloud was $9.7 billion, a 22% increase year-over-year.

– Server products and cloud services revenue increased 27% year-over-year, driven by Azure revenue growth of 73% year-over-year.

– Revenue in More Personal Computing was $10.7 billion, an increase of 8% year-over-year.

– Windows OEM revenue increased 9% year-over-year.

– Windows Commercial products and cloud services revenue increased 18% year-over-year.

– Surface revenue increased 21%.

– Gaming revenue grew 5% year-over-year, driven by Xbox software and services revenue growth of 12%.

– Search advertising revenue, excluding traffic acquisition costs, grew 12% year-over-year.

On the earnings call, executive vice president and CFO Amy Hood provided future guidance, including segment guidance:

– Productivity and Businesses Processes will generate revenue between $10.55 billion and $10.75 billion. Office commercial revenue growth will be down slightly, but Microsoft expects double-digit revenue growth for Dynamics 365, and LinkedIn revenue growth in the low 20s.

– Intelligent Cloud revenue will range between $10.85 billion and $11.05 billion.

– More Personal Computing will generate revenue between $10.8 billion and $11.1 billion. Surface will generate double-digit growth, while Gaming revenue is expected to decline.

Overall, we feel very good about the progress weve made thus far in FY19. Our decision to invest with significant ambition in high growth areas coupled with strong execution has resulted in material revenue growth at scale and a stronger position in many key markets, said Hood.

As FY20 approaches, we again see tremendous opportunity to drive sustained long-term growth. We will invest aggressively in strategic areas like Cloud through AI and GitHub, Business Applications through Power Platform and LinkedIn, Microsoft 365 through Teams, Security, and Surface as well as Gaming, Hood added.

Between April 23 and 24, Microsoft stock dipped from $125.44 per share to $125.01, but as of 7:06 p.m. yesterday, stock price per share was $129.15, up 3.3 percent from Wednesdays price and dangerously close to Microsoft’s 52-week high of $131.37.

Subscription News: Microsoft Cloud Growth Drives Strong Q3 FY2019 Results

Source: Google

Insider Take:

Microsoft had a great quarter and is anticipating a strong fourth quarter and finish to fiscal year 2019. It is interesting to see the company expects a decline in Gaming revenue, especially in light of this weeks announcement that the company is testing a Game Pass Ultimate subscription and the pre-launch of Xbox One S all-digital, disc-free console. Perhaps Microsoft is not anticipating significant revenue increases from those products and services until after the fourth quarter, or maybe those changes are coming to help improve the segment long-term.