Microsoft stock jumps with earnings difference and solid cloud results

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Microsoft

Shares jumped in late trading on Tuesday after the software company’s latest quarterly profit came in slightly better than expected.

While the company saw weakness in its PC software business, Microsoft (stock ticker: MSFT) posted strong results in cloud computing and enterprise applications. In particular, Azure’s public cloud business beat growth estimates on Wall Street, a relief to investors worried about the outlook for corporate IT spending.

The strong results could boost hopes that technical results for the December quarter may not be as bad as some on Wall Street had feared. Shares of Microsoft rose 5% in late trading shortly after the earnings announcement.

For the second fiscal quarter ended December 31, Microsoft reported revenue of $52.7 billion, up 2% from a year ago. That was a little shy of the Wall Street consensus standpoint of $53.1 billion, but within the company’s guidance range of $52.4 billion to $53.4 billion. Earnings on an average basis were $2.32 a share, three cents better than the Wall Street consensus of $2.29 a share. Gross margin was 66.8%, down slightly from 67.2% a year earlier.

Earnings on a GAAP basis were $2.20 per share. The difference is related to the company’s recent announcement of plans to Cut its workforce by 10,000 jobs, or just under 5% of the total workforce. The company said it would take $1.2 billion in fees in the December quarter for severance costs, as well as unspecified changes to the company’s hardware portfolio and office consolidation.

The company repurchased $4.6 billion worth of shares in the quarter.

Microsoft also said business bookings in the quarter rose 7% from a year ago, or 4% currency-adjusted; Bookings for the September quarter decreased 3%, but increased 16% in constant currency.

Microsoft said revenue from its intelligent cloud segment, which includes Azure, was $21.5 billion, up 18%, or 24% in constant currency. That was near the high end of the company’s guidance range of $21.25 billion to $21.55 billion. Azure revenue was up 31%, or 38% in constant currency.

The company said total Microsoft Cloud revenue (which included some additional items outside the Intelligence Cloud segment) was $27.1 billion, up 22%, or 29% adjusted for currency.

Microsoft said revenue in its Productivity and Business Operations segment was $17 billion, up 7%, or 13% currency-adjusted. That was just above the expected range of $16.6 billion to $16.9 billion.

The company said revenue from the personal computing segment was $14.2 billion, down 19% or 16% in constant currency, falling short of the company’s forecast range of $14.5 billion to $14.9 billion, amid a sharp slowdown in the personal computer market. Windows OEM revenue fell 39%, while Xbox content and services revenue fell 12%. Hardware revenue, mostly Surface PCs, fell 39%. Search and news ad revenue excluding traffic acquisition costs increased by 10% or 15% currency-adjusted.

International research firm Data Corp. recently estimated That PC shipments They were down 28% year-over-year in the December quarter. What started as weak consumer demand for personal computers spread to the enterprise as companies cut back on IT spending amid the economic slowdown.

For the March quarter, Wall Street sees total sales of $52.6 billion, including $16.9 billion in productivity and business operations, $22.3 billion in smart cloud computing, $13.6 billion in more personal computing, and earnings of $2.35 per share.

The company will provide guidance for the March quarter on its call with investors on Tuesday at 5:30 PM ET.

Write to Eric J. Savitz at [email protected]