Written by: Sophie Lund-Yates | Hargreaves Lansdown
Q2 revenue up 16% to $62.0bn ignoring the effect of exchange rates, in line with expectations
More Personal Computing revenue rose 18%, including a double digit helping hand from the Activision acquisition. Intelligent Cloud revenue rose 19%, with growth across server products and cloud services, driven by Azure revenue rising 28%
Operating profit rose 23% to $27.0bn
Microsoft had a lot to live up to this quarter, as even the most bullish tech investors wonder how much room there is to run for these stock market darlings. The software giant has delivered a healthy set of results, but not in a strong enough dose to appease the market. Cloud growth continues to impress by most standards, and this has been the nucleus of bubbling excitement around the stock. For now it seems concerns about general attitude towards growth stocks means good isn’t good enough, as the Federal Reserve’s latest interest rate decision edges closer.
Progress is impressive but there are lingering question marks. Businesses have been displaying signs of caution and it’s unclear if purse strings are going to loosen up much further this year. Spending on both cloud and advertising are due to increase but the pace of this could leave room for disappointment, depending on where the economy lands.
Microsoft’s core software-as-a-service offering remains its crowning jewel. Operating margins north of 40% are hard to find, and offer a buffer for the group to explore bold new frontiers in the world of AI. Microsoft is doing a lot of the right things and has an enviable product suite, the question now is whether market expectations and reality are in tandem – there’s growing concern that one is racing ahead of the other, and that tends to lead to trips and falls in the short-term.
The Activision acquisition has seen a jump in More Personal Computing revenue and investors will be wanting to see a longer-run of positive progress after the eye-wateringly expensive deal.