Microsoft Posts Upbeat Q3 Results on Cloud Strength, Provides Strong Guidance

Microsoft Corp. (NASDAQ: MSFT) reported upbeat fiscal third-quarter 2022 results, topping analysts’ expectations. Strong customer commitments to the company’s cloud platform and outstanding performance of all segments acted as tailwinds. Additionally, the company provided strong guidance for the June quarter. 

Following the news, shares of the tech giant jumped 4.47% in Tuesday’s extended trading session after closing 3.74% lower on the day. 

Results in Detail 

Microsoft reported adjusted earnings of $2.22 per share, up 14% year-over-year, and handily beat the Street’s estimates of $2.18 per share.  

Additionally, revenue surged 18% to $49.4 billion and beat analysts’ expectations of $49.03 billion.

Results included the impact of unfavorable foreign exchange rate movement and the acquisition of Nuance, which closed on March 4, 2022. 

Operating expenses came in at $13.4 billion, up 155 year-over-year. 

Segmental Revenues 

Microsoft reported Productivity and Business Processes quarterly revenue of $15.8 billion, up 17% year-over-year. Within the segment, commercial products and cloud services revenue jumped 12%, consumer products and cloud services revenue rose 11%, and LinkedIn revenue surged 34%. Notably, Microsoft 365 Consumer subscribers grew to 58.4 million in the quarter. 

Intelligent Cloud revenue stood at $19.1 billion, up 26%. Remarkably, Azure and other cloud services revenue growth was 46%. Microsoft Cloud revenue was up 32%, while commercial bookings reflected a growth of 28%. 

More Personal Computing increased 11% to $14.5 billion, including a rise of 11% in Windows OEM revenue. A robust PC market, mainly in the commercial segment, drove the results. 

Capital Deployment 

During the third quarter, Microsoft returned $12.4 billion to shareholders, including $7.8 in the form of share repurchases and $4.6 billion in dividends. 

CEO’s Comments 

Sharing his thoughts, Microsoft CEO Satya Nadella commented, “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.” 

Guidance 

For the Fiscal fourth quarter of 2022, the company has provided a strong segmental revenue outlook but expects the impact of foreign currency to decrease total revenue growth by around 2 points.   

Productivity and Business Processes unit is expected to report revenue in the range of $16.65-$16.9 billion, while Intelligent Cloud revenue is likely to land between $21.1 billion and $21.35 billion.  

Additionally, More Personal Computing unit revenue is anticipated to come in between $14.65 billion and $14.95 billion. 

Operating expenses are expected in the range of $14.8 billion to $14.9 billion. 

Management anticipates the Russia-Ukraine conflict to continue to impact the business in Q4, with about $110 million impacts on revenue and minimum impact on operating expenses. 

Wall Street’s Take

Shares have rallied 4% over the past year, while Wall Street analysts are still bullish about the stock. The Strong Buy consensus rating boasts 18 unanimous Buys. Looking ahead, the average Microsoft price target stands at $371.13, putting the upside potential at 37.34% from current levels. 

Website Traffic 

TipRanks’ Website Traffic Tool, which uses data from SEMrush Holdings (SEMR), offered insight into Microsoft’s performance in the March quarter.  

Supporting the upbeat March quarter results, the website traffic tool showed an uptrend in the website traffic. According to the tool, microsoft.com recorded a 20.2% year-over-year increase in global estimated visits in Fiscal Q3 2022.

The predictions that were based on TipRanks’ website visits data turned out to be correct, with Microsoft reporting strong revenues in the quarter. 

Bottom-Line 

With recent price performance, high analyst ratings, upbeat results, and a strong outlook in consideration, investors might consider investing in Microsoft. Also, vigilance on website trends reflected on TipRanks’ Website Traffic Tool could be a guiding factor for prudent investment decisions.  

Learn more about the Website Traffic tool in this video by Youtube sensation Tom Nash.  

Discover new investment ideas with data you can trust 

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