Microsoft Beats Earnings After Raising Prices for Office;  stocks rise after strong forecast

Microsoft Beats Earnings After Raising Prices for Office; stocks rise after strong forecast

Microsoft Corp. on Tuesday eclipsed profit and sales estimates and produced stronger-than-expected revenue across its business segments in an earnings report, and shares rose after executives’ forecasts also beat estimates.

Microsoft MSFT,
-3.74%
reported third-quarter fiscal earnings of $ 16.73 billion, or $ 2.22 per share, compared with $ 2.03 per share a year ago. Revenue increased to $ 49.36 billion from $ 41.71 billion in the same period last year. Analysts on average had expected earnings of $ 2.19 per share on sales of $ 49 billion, according to FactSet.

Microsoft stock fell more than 2% in after-hour trading soon after the results were released, but then reverted to slight gains in an unstable stock before getting a big boost from a forecast provided during a subsequent conference call. Shares were up more than 5% in the extended session. The stock closed down 3.7% to $ 270.22.

Microsoft’s software business increased sales by more than $ 2 billion after the company substantially raised prices across the board of its popular Office 365 suite of products for the first time since switching to an offering. cloud for it a decade ago. Sales in the “Productivity and Business Solutions” segment increased to $ 15.79 billion from $ 13.55 billion a year ago, while analysts on average expected $ 15.75 billion, according to FactSet.

The Office 365 price hike, announced last year, was supposed to go into effect in early March, but the company has delayed the price hike for some customers. Jefferies analysts noted that customers may have jumped to lock in lower prices by signing new deals before the price hike, which would be a boon for the third quarter, but could weigh on the company’s forecast for the rest of the year. ‘year.

“Office may have benefited from a pull-forward as the price increases took effect on March 1, as some customers may have renewed prior to the increase. This strength could be a potential risk for Office to the upside for the rest of the year. this calendar year, “analysts wrote in an April 18 note, while maintaining a buy rating and target price of $ 400.

Amy Hood, Microsoft’s Chief Financial Officer, led fiscal fourth quarter software sales from $ 16.65 to $ 16.9 billion, while analysts estimated $ 16.68 billion, suggesting that no weakness would be felt in the current quarter.

Microsoft’s most profitable segment is “Intelligent Cloud,” which includes its Azure cloud computing product as well as the sale of servers and other on-premises products. The cloud segment posted revenue of $ 19.05 billion, up from $ 15.19 billion a year ago, while analysts expected an average of $ 18.89 billion. Microsoft said Azure revenue increased 46%; the company does not make Azure-specific revenues, even though rivals Amazon.com Inc. AMZN,
-4.58%
and Alphabet Inc. GOOGL,
-3.59%

GOOG,
-3.04%
state sales for their competitive platforms, Amazon Web Services and Google Cloud, respectively.

Microsoft’s “More Personal Computing” segment has grown to $ 14.52 billion in revenue from $ 13.04 billion a year ago, despite fears that a pandemic boom in personal computer sales has come to an end. term. Analysts had expected sales of $ 14.3 billion on average, and fourth-quarter forecasts suggest slower segment growth is on the horizon.

Hood’s forecast was for fourth-quarter revenue to range from $ 52.4 billion to $ 53.2 billion, while analysts had expected $ 52.75 billion. After the forecast was delivered, the stock rose, as it did three months ago.

“In our largest quarter of the year, we expect our differentiated market position, customer demand across the solution portfolio, and consistent execution to drive another strong quarter of revenue growth,” Hood said, warning that Microsoft, like other large companies, is tackling the financial issues vote since the Russian invasion of Ukraine and the closure of COVID-19-related factories in China.

“We expect the war in Ukraine to continue to impact our business in the fourth quarter, impacting approximately $ 110 million on revenue and minimal impact on operating expenses,” he said. “Next, we took into account the current impact of closures in China in our outlook; however, extended production shutdowns until May would have a further negative impact on our outlook on OEM Windows, Surface and Xbox hardware. “

Microsoft shares have fallen 19.7% so far this year as the S&P 500 SPX Index,
-2.81%
decreased by 9.9%. According to data from FactSet, Microsoft risks falling below a market capitalization of $ 2 billion for the first time since June 2021; at closing price, Microsoft was valued at approximately $ 2.03 trillion.

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