Microsoft (MSFT) surged on Wednesday after the software leader beat Wall Street targets for its fiscal third quarter on the back of a strong performance from its cloud computing business. The company also guided higher for the current period. MSFT stock rose more than 6% on the news.
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The Redmond, Wash.-based company announced Tuesday evening that it earned $2.45 a share on sales of $52.9 billion for the quarter ended March 31. Analysts polled by FactSet had expected earnings of $2.24 a share on sales of $51 billion. Year-over-year, Microsoft’s profits rose 10% while sales grew 7%.
Microsoft Cloud sales jumped 22% to $28.5 billion in the March quarter.
“In the Microsoft cloud, we are the platform of choice to help customers get the most value from their digital spend and innovate for this next generation of AI,” Chief Executive Satya Nadella said in a statement. press.
MSFT stock rises on earnings and forecast
For the current quarter, Microsoft forecasts revenue of $54.85 billion to $55.85 billion. The midpoint of $55.35 billion was above Wall Street’s consensus target of $54.7 billion for the June quarter.
Microsoft expects “another quarter of healthy revenue growth,” Chief Financial Officer Amy Hood said on a conference call with analysts.
In morning trading in the stock market today, MSFT stock rose 6.9% to 294.40. During Tuesday’s regular session, MSFT stock slid 2.3% to close at 275.42, in an overall tough day for stocks.
Of Microsoft’s three business segments, Intelligent Cloud was the best performer in the March quarter. Segment revenue grew 16% year-over-year to $22.1 billion. The unit includes server products and cloud services such as Azure.
Microsoft’s Productivity and Business Processes unit saw sales increase 11% to $17.5 billion. The division includes Office productivity software as well as Dynamics and LinkedIn businesses.
And finally, Microsoft’s More Personal Computing unit saw sales drop 9% to $13.3 billion. The unit includes Windows PC software, Xbox video games, Surface computers, Internet search and advertising.
Analysts raise price targets on Microsoft
More than two dozen Wall Street analysts raised their price targets on MSFT shares after the upbeat earnings report.
“Cloud growth and the overall outlook for the June quarter was strong and much better than expected given recent market noise,” Wedbush Securities analyst Dan Ives said in a note to clients. He reiterated his outperformance rating on MSFT shares and raised his price target to 325 from 315.
Activision’s deal hits another roadblock
In addition, the British competition and markets authority on Wednesday blocked Microsoft’s acquisition of a video game publisher for $69 billion. ActivisionBlizzard (ATVI). Microsoft has announced its intention to appeal the decision.
The antitrust body said it believed “the deal would alter the future of the fast-growing cloud gaming market, leading to reduced innovation and less choice for UK gamers for years to come”.
The UK’s action reduces the chances that Microsoft will be able to close the deal.
“Although Microsoft and Activision have indicated they will appeal, we believe the chance of success is no more than 10%,” TD Cowen analyst Doug Creutz said in a note to clients.
On Tuesday, the New York Post reported that Microsoft was preparing to complete the purchase of Activision, despite the Federal Trade Commission’s decision in December to halt the deal due to antitrust concerns. Microsoft has announced its intention to buy the video game publisher in January 2022.
Microsoft is a long-term leader
MSFT stock has an IBD composite rating of 94 out of 99, according to IBD Stock Checkup. This puts Microsoft in the top 6% of stocks by performance over the past 12 months.
IBD’s Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a composite rating of 90 or higher.
Additionally, MSFT stock is on the IBD Tech Leaders list and in the IBD Long-Term Leaders portfolio.
Microsoft stock has been boosted this year by the company’s efforts to infuse artificial intelligence into its software and services.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
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