Microsoft Revenue, Profit Misses Estimates

The companyÂ's Devices and Consumer (D&C) Licensing segment licenses Windows operating system and related software; Microsoft Office for consumers; and Windows Phone operating system.

The software giant posted lower than expected earnings and profits for the latest quarter, sending shares down more than 4% in after-hours trading.

"We exceeded $10 billion in commercial cloud annualized revenue run rate", said Satya Nadella, CEO at Microsoft. Thursday's report came as other industry stalwarts reported their own struggles with seismic shifts in the way people use technology. Sagging PC sales were a major reason why Intel is slashing 12,000 jobs. However, its cloud business grew more than expected. And Microsoft expects revenue in the More Personal Computing segment of $8.7 billion to $9 billion. Azure revenue increased 120% in constant currency, with revenue from premium services growing triple digits for the seventh consecutive quarter. Microsoft has been hit hard by the global fall of PC shipments, with IDC analysts pointing to a dive of 11.5 percent year-on-year in the first quarter of 2016.

However, Phone revenue declined by 46% in constant currency. But in fact Microsoft's cloud run rate grows in fits and starts, and is timed with its traditional enterprise sales cycle.

Some of that growth can be credited to Windows 10, which comes with a redesigned Web browser and Cortana, a Siri-like digital assistant. Signaling a persistent decline in the PC market, Windows OEM Pro revenue declined 15 percent as businesses hold off on commercial PC purchases. On the consumer side, there are 22.2 million Office 365 subscriptions, up 6%. And because Microsoft delivers regular updates over the Internet, analysts say that should help the company sell extra features, particularly to business users. Taking a look at the daily chart we can see the last time MSFT traded below this price level was on March 10th when it traded at $52.05.

The number of Microsoft's Commercial Office 365 customers rose by 57 percent in the third quarter to pass 70 million monthly active users, Nadella said. It generated total adjusted revenue of $22.1 billion, largely in line with analyst estimates. In addition to non-GAAP metrics, Microsoft also added constant currency results due to the high U.S. dollar, and based on constant currency (CC), revenue was up 5%, operating income was up 10%, net income was up 6%, and earnings per share were up 10%.

"Ultimately, our thesis that [Microsoft] is the dominant hybrid cloud company was more than supported by results this quarter, and we would be buyers on any weakness", Oppenheimer analysts said. Some analysts were inclined to accept that report.

Microsoft paid $6.4 billion back to investors in Q3 2016, with $3.6 billion in share buybacks and $2.8 billion in dividends.

Related News: