Microsoft Corporation Q3 earnings report for the 2023 fiscal year amassed a total income of $52.9B (up +7% y/y, +0.4% q/q), surpassing Wall Street’s estimates of ~$51B by ~$1.85B. Its earnings per share (EPS) also came out at $2.25, much higher than the estimated $2.20.
Its shares rose 9% in extended trading on Tuesday after the financial report was released, which surpassed estimates from analysts. Asides the latest spike, Microsoft shares have appreciated by 15% so far this year, while the S&P 500 index is up 6%.
For the 4th quarter of 2023, Microsoft finance chief Amy Hood called for $54.85 billion to $55.85 billion in revenue, during a conference call with analysts. The middle of the range, at $55.35 billion, implies 6.7% growth, topping the $54.84 billion estimate from market experts surveyed by Refinitiv.
“As with any significant platform shift, it starts with innovation, and we’re excited about the early feedback and demand signals from the AI capabilities we’ve announced to date. We will continue to invest in our cloud infrastructure, particularly AI-related spending, as we scale to the growing demand driven by customer transformation. And we expect the resulting revenue to grow over time,” Hood said.
Microsoft’s net income rose 9% to $18.3 billion, or $2.45 per share, from $16.73 billion, or $2.22 per share, a year ago, while revenue increased 7% to $52.86 billion from $49.36 billion a year ago.
Revenue in Microsoft’s Intelligent Cloud business segment, which includes the Azure public cloud, Enterprise Services, SQL Server, and Windows Server, generated $22.08 billion in revenue. That’s up 16% and higher than the $21.94 billion consensus among analysts surveyed by StreetAccount.
The epicenter of Microsoft’s third-quarter income was from Azure Cloud business, which grew by 27% y/y. However, Azure’s revenue growth is decelerating rapidly, but according to Satya Nadella’s comments from the Q3 earnings conference call, it is winning market share.
With the advent of generative AI, Azure (cloud business) is expected to remain the primary growth driver at Microsoft for the coming years. And as of now, MSFT’s cloud business looks resilient in the face of daunting macroeconomic conditions.
The Productivity and Business Process segment containing Dynamics, LinkedIn, and Office, posted $17.52 billion in revenue, up about 11% and above the StreetAccount estimate of $17.05 billion. According to Microsoft, growth in revenue per user helped to achieve 14% more revenue from Office 365 software subscriptions.
According to CEO Satya Nadella, the Microsoft Teams app had over 300 million monthly active users in the quarter, compared to 280 million in the previous quarter.
Bing, Windows, Surface, and Xbox, combined had $13.26 billion in revenue, a decline of 9% but more than the $12.25 billion StreetAccount consensus. Bing currently has over 100 million daily active users, and revenue from gaming subscriptions neared $1 billion.
Sales of Windows operating-system licenses to device makers declined by 28%, but according to Hood, it was better than what management had expected. Gartner, a research firm estimated that its PC shipments would fall by 30%.
