Microsoft Corp (MSFT)

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Microsoft (MSFT) Stock Leaps After Q3 Earnings Beat, Robust Cloud Revenue Forecast
By: TheStreet | April 27, 2022

• "When it comes to our commercial cloud offerings, we have significant advantages," said CEO Satya Nadella.

Microsoft (MSFT) shares leapt higher Wednesday after the tech giant forecast stronger-than-expected revenue growth for its key divisions, offsetting concerns over the pace of gains in its Azure cloud offering.

Microsoft said revenues for its Intelligent Cloud division, which houses Azure, would likely rise to $21.1 billion and $21.35 billion for the current quarter, with double-digit percentage gains in the group's coming fiscal year.

Third quarter revenues for Azure, its flagship cloud offering, rose 46% from last year -- but flat to the December quarter -- helping overall group sale rise 18% to a record $49.4 billion for the three months ending in March, Microsoft's fiscal third quarter. Microsoft's adjusted earnings rose 13.8% from last year to $2.22 per share, just ahead of the Street consensus forecast of $2.19 per share.

We’re winning tier one infrastructure workloads, leaders in every industry from Blackrock to Bridgestone to Lufthansa are all moving mission-critical workloads to Azure," CEO Satya Nadella told investors on a conference call late Tuesday. "Overall, we’re seeing larger more strategic Azure commitments from industry leaders including Boeing, Kraft, Heinz, U.S. Bank, and Westpac, who all chose our cloud to accelerate their digital transformations."

"If there is any macro headwind, where you have more value for less price means you win," he added. "And in our case, when it comes to our commercial cloud offerings, we have significant advantages on that across the stack"

Microsoft shares were marked 5.4% higher in pre-market trading to indicate an opening bell price of $284.80 each.

In terms of reporting segments, Productivity and business processes division revenues rose 17% to $15.8 billion, Microsoft said, while Intelligent Cloud revenues were up 26% to $19.1 billion. More Personal Computing revenues rose 11% to $14.5 billion.

"Microsoft’s results, guidance, and tone were bullish for Microsoft shares, and perhaps could serve to modestly help alleviate pervasive macro fears for software investors more broadly," said BMO Capital Markets analyst Keith Bachman, who carries and 'outperform' rating with a newly-improved $345 price target on the stock.

"We would not characterize Microsoft as inexpensive relative to low double-digit growth, but we nevertheless like the shares given the broad sources of revenue and core franchises, which we think can continue to drive durable double-digit free cash flow," he added.

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