Microsoft Fourth Quarter Results Beats Analysts Expectations As Cloud Business Pumps Revenue Growth

Microsoft (MSFT) reported earnings of $1.46 per share on revenues of $38 billion for its fourth quarter of fiscal 2020. Both figures exceeded analysts’ estimates of $1.36 per share $35.5 billion, respectively.

Revenues from Microsoft’s key Intelligent Cloud segment, which includes its Azure platform, amounted to $13.4 billion versus analysts’ estimates of $13.1 billion -- and a 17% increase from $11.45 billion from the year-ago period.

But Azure’s revenue growth rate slowed to 47% from 59% in the prior quarter.

Revenues from the personal computing business came in at $12.9 billion, beating estimates of $11.5 billion.

However, Microsoft’s earnings were slightly hurt by a change in retail strategy – it took a one-time pre-tax charge of $450 million, or $0.05 per share, on the closure of its physical stores.

“The last five months have made it clear that tech intensity is the key to business resilience. Organizations that build their own digital capability will recover faster and emerge from this crisis stronger,” said Satya Nadella, chief executive officer of Microsoft. “We are the only company with an integrated, modern technology stack – powered by cloud and [artificial intelligence] and underpinned by security and compliance – to help every organization transform and reimagine how they meet customer needs.”

Amy Hood, executive vice president and chief financial officer of Microsoft, noted: “Our commercial cloud surpassed $50 billion in annual revenue for the first time this year. And this quarter our commercial bookings were better than expected, growing 12% year-over-year. As we drive growth across the company, we remain committed to investing in long-term strategic opportunities.”

BMO Capital Markets analyst Keith Bachman said Microsoft is well positioned for the next five years, although its stock currently trades at 1.15 times the S&P 500 based on free cash flow valuation.

Microsoft shares have climbed about 34% since the beginning of the year.