2023-10-25 00:04:54
Microsoft (MSFT-US)’s first-quarter results for the 2023 fiscal year, announced after the market closed on Tuesday (24th), exceeded Wall Street expectations, and profits surged due to a slowdown in operating expenses, prompting the stock price to rise by nearly 6% after the market closed.
Microsoft shares closed 0.37% higher on Tuesday and rose $13.47, or 4.08%, to $344 per share after the bell.Excluding after-hours swings, the stock is up nearly 38% year to date, compared with S&P 500 The index rose about 11%.
FY2023 Q2 financial forecast key data vs. analysts’ expected revenue: US$60.4 billion to US$61.4 billion (meaning median annual growth of 15%) vs. US$60.9 billion (consensus expectation of Refinitiv survey) First fiscal quarter (ending 9/30 ) Financial report key data vs. analyst expectations (LSEG survey consensus) Adjusted EPS: $2.99 vs. $2.65 Revenue: an annual increase of nearly 13% to $56.52 billion vs. $54.5 billion Net income: an annual increase of 27% to 222.9 billion dollars.
In the same period last year, revenue was US$50.12 billion and net income was US$17.56 billion, or US$2.35 per share.
Q2 revenue performance of each department
Intelligent Cloud Business Unit (Intelligent Cloud)
This division includes Azure public cloud, Windows Server, SQL Server, Visual Studio, GitHub and enterprise consulting services)
Revenue: increased 19% year-on-year to US$24.26 billion, higher than expected. (StreetAccount estimates $23.49 billion)
Azure’s revenue grew 29% in the quarter, higher than analysts’ previous forecast of 26% growth (consensus from CNBC and StreetAccount surveys).
Microsoft did not announce the specific revenue amount of Azure. It only announced that on a fixed exchange rate basis, Azure revenue increased by 28% year-on-year, accelerating from the 27% growth rate in the fourth quarter of the previous year.
For the second half of fiscal year 2024, Microsoft Chief Financial Officer Amy Hood expects Azure’s growth rate (calculated at constant exchange rates) to remain stable at the pace of the second fiscal quarter, approximately between 26% and 27%.
Microsoft CEO Satya Nadella said that Microsoft is still helping customers use Microsoft Cloud to get the most value from their digital spending and increase operating leverage.
Hood said customers are still looking for ways to save on cloud spending, a trend that several large cloud infrastructure vendors have pointed to over the past few quarters.
Nadella believes Microsoft may “go through some pretty extreme cycles” in the second half of this fiscal year.
At the same time, customers are flocking to new generative artificial intelligence (Gen AI) tools in the cloud because they are enhanced with software from Microsoft-backed startup OpenAI.
The Azure OpenAI service currently has 18,000 customers, up from 11,000 in July. Hood said that Azure’s improved GPU computing capabilities have promoted customer growth.
Hood estimates that about 3 percentage points of Azure’s growth rate this quarter will be related to AI, up from an estimate of 2 percentage points three months ago.
Hood said that from a competitive perspective, he is satisfied with Microsoft’s execution and market share, and is also satisfied with the continued trend.
Productivity and Business Processes
This division includes businesses such as Microsoft 365 productivity software subscription, LinkedIn and Dynamics. (Microsoft is renaming the Office 365 suite)
Revenue: increased 13% year-on-year to US$18.59 billion, higher than expected. (StreetAccount consensus estimate is $18.19 billion)
Nadella pointed out that the Team communication app currently has more than 320 million monthly active users, an increase from 300 million users half a year ago.
Attachment for “Importing Microsoft 365 Copilot AI to existing productivity software subscriptions”Canadian dollarOn the topic of “potential revenue from software,” Hood was cautious, saying only that the company expected “relevant revenue to gradually grow over time.”The appendixCanadian dollarThe software will be available to large businesses starting on November 1, with monthly fees starting at $30 per person.
More Personal Computing
This segment includes the Windows operating system, Surface devices, Xbox video game consoles and from the Bing search engine.
Revenue: up 3% year-over-year to $13.67 billion, higher than expected. (StreetAccount consensus estimate was $12.85 billion).
Microsoft’s Windows operating system licensing revenue from device manufacturers increased by 4% year-on-year in the first fiscal quarter, ending the trend of annual decline for five consecutive quarters. The PC market has begun to stabilize.
Technology industry research firm Gartner estimates that PC shipments will decline by 9% annually in the third quarter, which is much less severe than the 30% annual decline in the first quarter.
Microsoft continues to slow down the increase in R&D and sales and marketing costs, with operating expenses increasing by only 1.3% annually, the lowest increase since 2016.
First fiscal quarter developments
Microsoft launches new cybersecurity services, releases new Surface PCs, and says it will start selling its Microsoft 365 Copilot AI add-on to enterprises on November 1Canadian dollarpieces.
Earlier this month, Microsoft completed a $68.7 billion acquisition of video game publisher Activision Blizzard. Although Activision Blizzard’s performance has not yet been included in Microsoft’s first-quarter financial report, it will affect the performance of the next quarter to a certain extent.
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