Microsoft CEO Satya Nadella takes part in the Partnership for Global Infrastructure and Investment Event during the G7 Summit at the Borgo Egnazia resort in Savelletri, Italy, on June 13, 2024.
- Microsoft’s revenue grew 16%, faster than analysts had anticipated.
- Revenue from Azure and other cloud services was up 33%, surpassing estimates.
- Microsoft has revised its segment reporting practices, resulting in a considerably bigger Productivity and Business Practices unit.
- Guidance will come on a conference call at 5:30 p.m. ET.
Microsoft reported an earnings and revenue beat for the fiscal first quarter, as the company's Azure cloud infrastructure business grew faster than predicted.
Here's how the company performed in comparison with LSEG consensus:
- Earnings per share: $3.30 vs. $3.10 expected
- Revenue: $65.59 billion vs. $64.51 billion expected
Microsoft's revenue grew 16% year over year in the quarter, which ended on Sept. 30, according to a statement. Net income, at $24.67 billion, was up from $22.29 billion in the year-ago quarter.
In August, Microsoft said it would revise the reporting of business segments to reflect its management approach. Mobility and security services, along with some Windows revenue, are now part of the Productivity and Business Processes unit, which includes Office software.
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Revenue from Productivity and Business Processes reached $28.32 billion in the quarter. The number is up 12% and higher than the $27.90 billion consensus among analysts surveyed by StreetAccount. It's 38% higher than the $20.45 billion midpoint of the forecast that management gave in July, because the actual total accounts for the changes.
Money Report
Investors received a clearer picture of cloud computing consumption at Microsoft, because for the first time, the Azure and other cloud services revenue growth metric excludes mobility and security and Power BI data analytics sales. Azure growth for the quarter came in at 33%. CNBC's consensus for Azure growth was 32.8%, while StreetAccount's was 29.4%.
The full Intelligent Cloud segment including Azure, Windows Server and enterprise services generated $24.09 billion in revenue. That's up 20% and slightly more than the $24.04 StreetAccount consensus.
In Alphabet's earnings report on Tuesday, the internet company said its cloud business, which rivals Azure, grew nearly 35% from a year earlier to $11.35 billion, topping estimates. Amazon, which leads the cloud infrastructure market, is slated to report results after the close on Thursday.
Microsoft has shrunken the size of its More Personal Computing segment through the reporting changes. In the fiscal first quarter it contributed $13.18 billion in revenue. That's up about 17% and above the $12.56 billion StreetAccount consensus.
The company saw 2% growth in sales of devices and sales of Windows operating system licenses to device makers. Industry researcher Gartner estimated that quarterly PC shipments declined 1.3%.
During the quarter, Microsoft worked to help customers recover after a flawed update to CrowdStrike security software brought down Windows PCs globally. Microsoft said it would collaborate with BlackRock on an artificial intelligence infrastructure investment fund, with a goal of $30 billion in initial capital.
Microsoft's AI investments continue to be a major focus for investors, as the company builds out its infrastructure and ramps up chip spending to handle heftier workloads. Microsoft is the main investor in ChatGPT creator OpenAI, which was valued at $157 billion in a financing round earlier this month.
As of Sept. 30, Microsoft had racked up more than $108 billion in finance leases that had not started, which UBS analysts have said might include third-party cloud spending to meet AI demand.
At the same time, Microsoft has been spending more cash on property and equipment. In the fiscal first quarter it grew 50% year over year to $14.92 billion. The consensus among analysts polled by Capital IQ was $14.58 billion.
Excluding the move after hours, Microsoft stock was up about 16% for the year, while the Nasdaq gained 24% during the same period.
Executives will discuss the results and issue guidance on a conference call with analysts starting at 5:30 p.m. ET.
This is breaking news. Please check back for updates.
Correction: A prior version of this story had an incorrect date for the end of the quarter. It was Sept. 30.
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