Microsoft Beats Q3 Financial Estimates

Microsoft reported an 18% jump in revenue for Q3 to $49.4 billion, thanks to strong growth in its Office and Microsoft Cloud divisions.

The company shared its numbers in its quarterly financial report and follow-up investor call with Microsoft CEO Satya Nadella. In it, he praised Microsoft's strong growth, during uncertainty with conflict overseas and the lingering effects of the pandemic.

"It was a record third quarter, driven by the continued strength of the Microsoft Cloud, which surpassed $23 billion in revenue, up 32% year-over-year," he said. "Going forward, digital technology will be the key input that powers the world's economic output. Across the tech stack, we are expanding our opportunity and taking share as we help customers differentiate, build resilience and do more with less."          

Looking specifically at the company's cloud business, the third quarter brought in $19.1 billion, an increase of 26% over the same time period last year. This also outpaced economic estimates of $18.89 billion for the division.

Microsoft's combined Office and cloud services had healthy jumps in both the consumer and commercial sectors. Office commercial products and services revenue increased 12% and 11% on the consumer side, while Microsoft 365 Consumer subscribers grew to 58.4 million.

However, the numbers also provided some concern when it comes to Azure. Despite "better than expected growth in large, long-term Azure contracts," according to Microsoft Chief Financial Officer Amy Hood on the earnings call, the company does not expect the positive growth to continue into the near future. "We expect Azure revenue growth to be sequentially lower by roughly two points on a constant currency basis with a bit more FX impact on U.S. dollar growth than at the segment level," said Hood.

Other revenue highlights include:

  • Windows OEM revenue increased 11%.
  • Windows commercial products and services increased 14%.
  • Search and news advertising revenue increased 25%.
  • Surface revenue increased 13%.
  • LinkedIn revenue increased 34%.
  • Dynamics products and cloud services revenue increased 22%.
  • Xbox content and services revenue increased 4%.

Microsoft didn't mention the pending acquisition of Activision-Blizzard for $68.7 in either the financial report or the investor call. Wednesday saw the shares of the gaming company, which has yet to be punched, fall to its lowest level ($76.10 per share) since Microsoft announced the deal. This is almost 20% less than the proposed $95 Microsoft agreed to pay per share.

As for Microsoft's stock, Tuesday's strong earnings report boosted its value on Wednesday, ending the day at $283.22 per share, an increase of 4.81%.

About the Author

Chris Paoli (@ChrisPaoli5) is the associate editor for Converge360.


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