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Microsoft Corp.

Microsoft Beats Estimates, But Sales Guidance Misses Expectations

Strategic Insights

— 1 min read

Microsoft reported a strong fiscal second-quarter earnings performance, thanks to growth in its cloud services and hardware sales, offsetting declining Windows software business. However, the company's sales guidance for the March quarter fell short of analyst expectations. With a 1% decline in EPS excluding restructuring charges, Microsoft's quarterly performance was characterized as a "B+" by FBR Capital Markets analyst Daniel Ives.

Key Takeaways:

  • Microsoft's fiscal second-quarter earnings of 77 cents per share beat analyst expectations, excluding a charge of 2 cents per share related to corporate restructuring and integration of the Nokia devices acquisition.
  • Sales rose 8% to $26.47 billion, beating Wall Street's forecast of $26.3 billion, due to growth in cloud services and hardware sales.
  • Commercial sales of Office productivity software slipped, but cloud and Xbox business were strong in the quarter.
  • Microsoft expects sales to rise 3% year over year to $21 billion at the midpoint of its guidance for the March quarter, which missed analyst expectations.
  • The company continues to transform into a "productivity and platform company for the mobile-first, cloud-first world," according to CEO Satya Nadella.
  • Commercial cloud revenue rose 114% year over year, driven by Office 365, Azure, and Dynamic CRM Online, and is on an annualized revenue run rate of $5.5 billion.
  • Microsoft sold 10.5 million Lumia units, driven by growth in affordable smartphones, and 39.7 million non-Lumia feature phones.
  • Surface tablet-notebook sales rose 24% to $1.1 billion, driven by Surface Pro 3 and accessories.

Statistics:

  • Microsoft's fiscal second-quarter earnings of 77 cents per share exclude a charge of 2 cents per share related to corporate restructuring and integration of the Nokia devices acquisition.
  • Average analyst expectations for EPS in the March quarter were $0.69 (1% increase year over year).
  • Microsoft's cloud and consumer businesses drive 8% increase in Q2 sales to $12.9 billion.
  • Commercial sales of Office productivity software fell 1%, impacted by declines in commercial PC sales after the Windows XP refresh cycle.
  • Commercial cloud revenue rose 114% year over year to an annualized revenue run rate of $5.5 billion.
  • Microsoft sold 10.5 million Lumia units, driven by growth in affordable smartphones.

Sources:

  • Investor's Business Daily, "Microsoft Beats Estimates, But Sales Guidance Misses Expectations"

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