Technology giant Microsoft Corporation (MSFT) announced record-breaking fourth-quarter and full fiscal year 2021 results. Shares were up almost 1.7% in after-hours trading on July 27.
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In the fourth quarter, the company reported earnings of $2.17 per share, up 49% year over year, and surpassed the Street’s estimate of $1.90 per share.
Revenue climbed 21% to $46.15 billion compared to the year-ago period and beat analysts’ estimates of $44.1 billion.
The company’s segments delivered solid quarterly growth compared to the year-ago period. Intelligent Cloud revenue grew 30%, primarily backed by a 51% growth in Azure, its cloud computing platform.
Productivity and Business Processes revenue grew 25%, driven by strong performances by both Office 365 software and LinkedIn.
The More Personal Computing segment’s revenue grew a modest 9%, partly due to a fall in both Windows OEM and Surface revenue driven by supply-chain constraints.
During the quarter, the company undertook a $6.2 billion share buyback program and $4.2 billion in dividend payouts. (See Microsoft stock charts on TipRanks)
For the fiscal year 2021, earnings were up 38% at $7.97 per share, and revenue increased 18% year-over-year to $168.09 billion.
Satya Nadella, Chairman and CEO of the company, said, “Our results show that when we execute well and meet customers’ needs in differentiated ways in large and growing markets, we generate growth, as we’ve seen in our commercial cloud – and in new franchises we’ve built, including gaming, security, and LinkedIn, all of which surpassed $10 billion in annual revenue over the past three years.”
For the first quarter of FY22, the company forecasts its Productivity and Business revenue in the range of $14.5 – $14.75 billion, Intelligent Cloud revenue in the range of $16.4 – $16.65 billion, and More Personal Computing revenue to be in the range of $12.4 – $12.8 billion.
Following the results, Wedbush analyst Daniel Ives reiterated a Buy rating on the stock with a price target of $325, implying 13.4% upside potential to current levels.
Ives believes the work from home (WFH) trend driven by the pandemic is a major driver for the company’s growth, especially in its Azure and Office 365 segments.
Ives said, “With 40% of workloads in the cloud today poised to hit 55% by 2022, we believe this overall WFH and hybrid environment shift has accelerated the cloud trend as more Chief Investment Officers are being forced to face the new normal/reality for their respective organizations looking ahead.” And added that Microsoft is “firmly positioned to gain more market share in this cloud arms race.”
Microsoft commands a Strong Buy consensus rating based on 20 unanimous Buys. The average Microsoft price target of $313.56 implies 9.4% upside potential to current levels. Shares have increased 41.8% over the past year.
Microsoft scores a “Perfect 10” from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
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