Microsoft Earnings Beat: Azure Growth & Stock Dip
Microsoft Reports Fiscal Q4 2021 Earnings
Following the market close today, Microsoft announced its fiscal Q4 2021 earnings, covering the period aligned with the second calendar quarter of the current year. Revenues reached $46.2 billion, accompanied by a net income of $16.5 billion and earnings per share of $2.17.
Revenue experienced a growth of 21% when contrasted with the same quarter last year. Net income saw an even more substantial increase, expanding by 47% over the prior-year period.
Earnings Beat Expectations
The reported results surpassed analyst expectations, as detailed by Yahoo Finance, which projected revenues of $44.1 billion and earnings per share of $1.90. Despite this success, the software company’s stock price declined in after-hours trading.
This dip may be attributed to the results falling short of unofficial “whisper numbers.” Considering Microsoft’s recent trading history near all-time highs, the current 3% after-hours decrease is noteworthy. Broader weakness in tech stocks during regular trading hours also contributed, with Microsoft shedding nearly 1% of its value.
Deeper Dive into Performance
Given Microsoft’s considerable size, a closer examination of its performance is warranted.
Azure Cloud Growth
Microsoft’s cloud computing platform, Azure, demonstrated robust growth, achieving a 51% increase in revenue compared to the same quarter last year. Adjusting for currency fluctuations, this figure reduces to 45%, according to the company’s reporting.
This 51% growth rate represents Azure’s strongest performance since fiscal Q3 2020, which corresponds to the first calendar quarter of the previous year.
Segment Performance Breakdown
Analyzing the company’s various divisions, the following revenue growth rates were observed:
- Intelligent Cloud: 30% growth, significantly influenced by Azure’s performance.
- Productivity and Business Processes: 21% growth, driven by LinkedIn (46% growth) and the Dynamics 365 CRM product (49% growth).
- More Personal Computing: 9% growth, primarily fueled by search revenue (53%, excluding traffic acquisition costs).
Areas for Improvement
Certain areas within Microsoft’s revenue review exhibited slower growth. Office Consumer revenue increased by 18%, a relatively modest figure. Windows OEM revenue experienced a 3% decline, and Surface revenue decreased by 20%.
However, these weaker performances did not significantly detract from the company’s overall growth and substantial profitability.
Capital Allocation and Future Outlook
Microsoft’s financial strength is evident in its capital allocation strategy. The company allocated $10.4 billion to share buybacks and dividends in the latest quarter.
The rationale behind these share repurchases is somewhat unclear, given Microsoft’s market capitalization exceeding $2 trillion. At this scale, reducing the share count is a costly and gradual process, raising questions about alternative uses for the company’s substantial cash reserves.
Despite these considerations, Microsoft’s results reinforce the trend of strong performance among major technology companies. This positive momentum could bolster investor confidence in the technology sector as a whole, potentially benefiting startups.
