MSFT Stock: How Did Microsoft Perform in the June Quarter?

After the market close, big tech companies, including Alphabet (NASDAQ: GOOGL) and Microsoft (NASDAQ: MSFT), announced their June quarter earnings yesterday. While GOOGL stock is up 6% in early-market trading, MSFT stock is down 4%. Let's see how Microsoft performed in fiscal Q4 of 2023 (which ended in June).

What drove MSFT stock results?

The decline in Microsoft stock was triggered by the company's quarterly revenue forecast, which didn't meet analysts' projections.

In the June quarter, Microsoft posted earnings per share of $2.69, beating Wall Street's expectation of $2.55. Revenue was reported at $56.19 billion, higher than the $55.47 billion predicted by analysts.

During a conference call, Microsoft's CFO, Amy Hood, provided revenue guidance for the fiscal first quarter of 2024 and forecast sales between $53.8 billion and $54.8 billion. The mid-range figure, $54.30 billion, suggests an 8% growth but still falls short of the consensus estimate of $54.94 billion. 

Additionally, the business segment, which includes the Windows operating system, didn't perform as anticipated, with Hood projecting revenues between $12.5 billion to $12.9 billion, less than the $13.22 billion forecasted by analysts.

It was also the first time since 2017 that the company's growth has been less than 10% for three consecutive quarters. Meanwhile, net income rose to $20.08 billion, up from the previous year's $16.74 billion, or $2.23 per share.

Microsoft Azure is a key driver of sales

Microsoft's Intelligent Cloud segment performed notably well, generating revenue of $23.99 billion, a 15% increase and higher than estimates of $23.79 billion. The segment includes Azure public cloud, SQL Server, Windows Server, Visual Studio, Nuance, GitHub, and enterprise services.

Azure's revenue surged by 26% during the quarter, outpacing the predicted 25% growth. Microsoft CEO Satya Nadella revealed on the call that "Microsoft Cloud surpassed $110 billion in annual revenue, up 27% in constant currency, with Azure accounting for more than 50% of the total for the first time."

On the same day, Alphabet, Google's parent company, announced a 28% revenue increase from its cloud products, including Google Workspace productivity apps and Google Cloud Platform.

However, in the face of an uncertain economy, companies utilizing Microsoft, Amazon (NASDAQ: AMZN), and Google cloud services have been careful with their spending. Microsoft and its cloud competitors have also cut back on their expenditures, and its R&D costs declined year over year for the first time since 2016. 

In May, Nadella announced a freeze on salary increases for the year, and in July, he revealed plans for a new round of job cuts, separate from the layoffs of 10,000 workers that began in January.

Microsoft's productivity and business processes segment, which includes Office productivity software, LinkedIn, and Dynamics, reported revenue of $18.29 billion, showing a 10% increase. This figure surpassed the $18.06 billion estimate by StreetAccount.

Meanwhile, the Personal Computing segment, encompassing Windows, devices, gaming, and search advertising, generated $13.91 billion in revenue. Despite a year-over-year decrease of 4%, this segment's revenue still exceeded the StreetAccount consensus of $13.58 billion.

Sales of Windows licenses to device manufacturers declined by 12%, a performance that Microsoft's CFO, Amy Hood, described as better than expected. The past year has seen a rush by consumers and companies to purchase PCs following the outbreak of Covid, setting a high benchmark for comparisons. Tech industry research firm Gartner (NYSE: IT) estimated that PC shipments, including Apple's (NASDAQ: AAPL) MacBooks, dropped roughly 17% during the quarter.

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