Microsoft stock flat despite better-than-expected earnings, strong Azure growth

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Today after the bell, Microsoft reported its calendar Q3 2020 earnings, the period of that time corresponds to its Q1 fiscal 2021 period. In the three months ending September 30, Microsoft had revenues of $37.2 billion and per-share profit of $1.82.

Analysts had anticipated the company to report $1.54 in earnings per share, generated from $35.72 billion in revenue.

In the aftermath of the beat, shares of the company are effectively flat, gaining only a fraction of a point in after-hours trading. Microsoft was up by nearly 2% in afternoon trading, despite somewhat uneven markets.

Helping drive the movement in Microsoft share price was the all-important Azure update. Here’s what Microsoft had to say:

Server products and cloud services revenue increased 22% (up 21% in constant currency) driven by Azure revenue growth of 48% (up 47% in constant currency)

The broader category that Azure sits inside of, called “Intelligent Cloud,” reported $13.0 billion in revenue, up 20% from the year-ago quarter.

That was the best performing of Microsoft’s three units, which also include the Office-and-LinkedIn heavy “Productivity and Business Processes” group that posted $12.3 billion in revenue — up 11% — and the Windows-and-Xbox heavy “More Personal Computing” which had revenues of $11.8 billion, up a smaller 6% compared to the year-ago quarter.

Other standouts from a first-read of the company’s earnings report include:

  • Strong Surface revenue, rising 37% compared to the year-ago period
  • Bing revenue declines, with the company saying that “[s]earch advertising revenue excluding traffic acquisition costs decreased 10%”
  • Commercial cloud revenues of $15.2 billion, up 31% from the year-ago period
  • LinkedIn manage 16% revenue gains in the quarter

Looking ahead, analysts expect Microsoft to record $1.60 in per-share profit in the current quarter, off $40.4 billion in total revenue. The company will announce its own projections on its earnings call.

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