Microsoft Earns 69 Cents per Share

A very good earnings report from Microsoft (MSFT). The software giant earned 69 cents per share which was 11 cents better than expectations.

Microsoft Corp. remains a distant second to Amazon.com Inc. in cloud computing, but the software giant’s latest quarterly results suggest that it is effectively managing the transition from selling software licenses to selling on-demand computing services.

In its fiscal fourth quarter, sales of the Redmond, Wash., company’s Azure cloud computing service more than doubled, offsetting a decline in the segment that includes its flagship Windows operating system and its struggling mobile-phone business.

The strength of Microsoft’s cloud business surprised investors. The company beat expectations for both sales and profit, which spurred a 4% rise in Microsoft’s shares in after-hours trading.

Microsoft has proved especially adept at selling its cloud services to existing customers, taking advantage of longstanding relationships with companies that have run its software in their own data centers.

“They are effectively getting their customers to transition to the cloud,” Stifel Nicolaus & Co. analyst Brad Reback said.

Microsoft’s transition to the cloud comes with an important cost: eroded margins. When the company relied on software licenses sold to companies every few years, it registered fat profits. But margins on cloud services, which are sold by subscription, are slimmer.

For the quarter, gross margins slid 14% to $12.64 billion.

The stock was up 4.2% in after hours trading.

Posted by on July 19th, 2016 at 8:34 pm


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