Microsoft beats earnings estimates with $41.7B in revenue, up 19%, and $15.5B in profit, up 44%

A quiet Microsoft campus during the COVID-19 pandemic. (GeekWire Photo / Todd Bishop)

Microsoft beats earnings estimates: The Redmond, Wash., tech giant reported $41.7 billion in revenue for the March quarter, up 19% year-over-year — its biggest revenue growth since 2018 — and profits of $15.5 billion, up 44%. Non-GAAP earnings per share was $1.95.

Analysts expected revenue of $41 billion, and earnings per share of $1.78. Shares were down more than 3% in after-hours trading.

Microsoft is inching toward the $2 trillion market capitalization milestone; shares have risen 20% this year. The company continues to see growing demand for its cloud services as the pandemic has accelerated technology adoption.

“In a nutshell, these were strong numbers that will be another feather in the cap for MSFT with the stock selling off after hours in knee jerk fashion as the Street was hoping for a bigger top-line beat,” Wedbush Securities analyst Dan Ives wrote in a report. “Looking at the numbers, cloud remains the core of the bull story going forward.”

Key takeaways:

  • Among the company’s three main business divisions, the biggest revenue increase from Microsoft’s fiscal third quarter again came in the Intelligent Cloud segment, up 23% from the prior year to $15.1 billion. The segment was Microsoft’s largest division by revenue. It was driven by a 50% increase in revenue for Microsoft’s Azure cloud computing platform and related services, beating the company’s expectations. That follows another 50% growth rate in the December quarter, and a 48% growth rate in the September quarter. Operating income for the segment was up 41% to $6.43 billion.
  • Microsoft’s More Personal Computing segment, including Windows and Xbox, posted $13 billion in revenue, up 19%, driven in part by strong demand for consumer PCs. Microsoft’s gaming revenue was up 34%. Surface revenue grew 12%. Search advertising revenue increased 17% with improved customer ad spend.
  • Overall revenue in the Productivity and Business Processes division was $13.6 billion, up 15%. This division includes Office and related products, including Microsoft Teams, which now has 145 million daily active users, up from 115 million in October. Office 365 Commercial revenue rose 22%. LinkedIn revenue grew 25% driven by strong advertising demand. LinkedIn now has 756 million members. There are now 50.2 million Microsoft 365 Consumer subscribers, up from 39.6 million a year ago, a 27% increase.

Satya says: “Over a year into the pandemic, digital adoption curves aren’t slowing down. They’re accelerating, and it’s just the beginning,” Microsoft CEO Satya Nadella said in a statement. “We are building the cloud for the next decade, expanding our addressable market and innovating across every layer of the tech stack to help our customers be resilient and transform.”

Nadella will speak on a call with analysts later today; stay tuned for updates.

Another busy quarter: Microsoft landed a $21.8 billion deal with the U.S. Army to make HoloLens-type mixed reality headsets for soldiers; announced plans to reopen its HQ campus; added various features to its Teams collaboration software; completed its $7.5 billion acquisition of ZeniMax Media; and reportedly pursued acquisitions of Pinterest and Discord. Earlier this month the company announced its $19.7 billion acquisition of Nuance Communications.

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