Microsoft Shares Hit All-Time High On Blowout Earnings, Growing Cloud Sales

Microsoft Corp., which became the world’s third trillion-dollar firm last April, saw its shares rise Thursday a truly modest 0.11% Thursday to $136.42 -- the all-time high for the stock -- on record revenue and net income.

The firm’s fourth quarter 2019 earnings report showed revenue of $33.7 billion (up 12 percent year-on-year); GAAP net income of $13.2 billion (up 49 percent year-on-year); and $10.6 billion non-GAAP (up 21 percent year-on-year).

Diluted earnings per share came in at $1.71 GAAP and $1.37 non-GAAP, which represented a mammoth jump of 50 percent and 21 percent, respectively.

Microsoft stock hit $139.87, up 2.53 percent in afterhours trading. It opened at $135.55 and ended the regular trading day with a market cap of $1.05 trillion.

“It was a record fiscal year for Microsoft, a result of our deep partnerships with leading companies in every industry,” said CEO Satya Nadella.

“Every day we work alongside our customers to help them build their own digital capability – innovating with them, creating new businesses with them, and earning their trust. This commitment to our customers’ success is resulting in larger, multi-year commercial cloud agreements and growing momentum across every layer of our technology stack,” he said.

Microsoft’s Intelligent Cloud business segment contributed $11.39 billion in revenue in the quarter versus the $11.02 billion expected by analysts polled by FactSet. This segment includes the Azure public cloud, Windows Server, SQL Server, Visual Studio, GitHub and consulting services.

Revenue from Microsoft Azure (the company’s cloud platform) surged 64 percent year-on-year, which is surprisingly the lowest growth rate in four years. Analysts said this low growth rate indicates Microsoft still has room to catch up to Amazon Web Services while fending off Google Cloud Platform.

The Personal Computing business segment, which consists of Windows, Surface, Xbox and search, ended the quarter with revenues of $11.28 billion. FactSet analysts had a consensus forecast of $10.99 billion for the segment.

Surface revenue was higher in the same quarter in 2018, this time by 14 percent. Microsoft attributes this to “strong growth in our commercial segment.”

Analysts said the growth shows Surface hardware is selling well despite the absence of refreshed models during the quarter. Microsoft released Surface Go in 2018 and this machine helped boost revenue. There’s no refreshed model in 2019, however.

Microsoft’s Productivity and Businesses segment (Office, Dynamics and LinkedIn) produced $11.05 billion in quarterly revenue compared to the $10.70 billion FactSet consensus estimate.

On the other hand, Microsoft’s gaming business has stalled. Gaming revenue dropped by 10 percent this quarter, together with Xbox software and services, whose revenue fell 3 percent.