MSFT share: Microsoft beats targets for March quarter
Microsoft ( MSFT ) shares rose Wednesday after the software leader beat Wall Street’s third-quarter targets, thanks to a strong showing from its cloud computing businesses. The company also guided higher for the current period. MSFT shares rose over 6% on the news.
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The Redmond, Wash.-based company said late Tuesday that it earned $2.45 a share on sales of $52.9 billion for the quarter ended March 31. Analysts polled by FactSet had expected earnings of $2.24 per share on sales of $51 billion. On an annual basis, Microsoft’s earnings rose by 10%, while sales rose by 7%.
Microsoft Cloud sales rose 22% to $28.5 billion in the March quarter.
“Across the Microsoft Cloud, we are the platform of choice to help customers make the most of their digital spend and innovate for this next generation of AI,” CEO Satya Nadella said in a press release.
MSFT shares rise on earnings, guidance
For the current quarter, Microsoft forecast revenue of $54.85 billion to $55.85 billion. The $55.35 billion midpoint was above Wall Street’s consensus estimate of $54.7 billion for the June quarter.
Microsoft expects “another quarter of healthy revenue growth,” Chief Financial Officer Amy Hood said on a conference call with analysts.
In morning trading on the stock market today, MSFT shares rose 6.9% to 294.40. During the regular session on Tuesday, MSFT stock fell 2.3% to close at 275.42, in a tough day for stocks.
Of Microsoft’s three business segments, Intelligent Cloud was the best performer in the March quarter. Revenue in the segment increased 16% year-over-year to $22.1 billion. The unit includes server products and cloud services such as Azure.
Microsoft’s Productivity and Business Processes unit increased sales by 11% to $17.5 billion. The division includes Office productivity software as well as the Dynamics and LinkedIn businesses.
And finally, Microsoft’s More Personal Computing unit saw a 9% decline to $13.3 billion. The device includes Windows PC software, Xbox video games, Surface computers, internet search and advertising.
Analysts raise price target on Microsoft
More than two dozen Wall Street analysts raised their price targets on MSFT stock after the positive earnings report.
“Cloud growth and the overall outlook for the June quarter were solid and much better than feared given recent market noise,” Wedbush Securities analyst Dan Ives said in a note to clients. He reiterated his outperform rating on MSFT shares and raised his price target to 325 from 315.
The Activision deal hits another roadblock
In other news, Britain’s Competition and Markets Authority on Wednesday blocked Microsoft’s $69 billion acquisition of the video game publisher. Activision Blizzard (ATVI). Microsoft said it plans to appeal the ruling.
The antitrust body said it believes “the deal will change the future of the fast-growing cloud gaming market, leading to reduced innovation and less choice for UK gamers for years to come.”
The UK’s action reduces the chances of Microsoft completing the deal.
“Although Microsoft and Activision indicated they would appeal, we believe the chances of success are no more than 10%,” TD Cowen analyst Doug Creutz said in a note to clients.
On Tuesday, the New York Post reported that Microsoft is preparing to complete its Activision purchase, despite the Federal Trade Commission’s move in December to halt the deal due to antitrust concerns. Microsoft announced its intention to acquire the video game publisher in January 2022.
Microsoft is a long-term leader
MSFT stock has an IBD Composite Rating of 94 out of 99, according to IBD Stock Checkup. That puts Microsoft in the top 6% of stocks for performance over the past 12 months.
IBD’s Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
Furthermore, the MSFT share is on the IBD Tech Leaders list and in the IBD Long-Term Leaders Portfolio.
Microsoft shares have received a boost this year from the company’s efforts to add artificial intelligence to its software and services.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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