Microsoft hits $1 trillion market cap after earnings beat estimates

KEY POINTS

  • Microsoft reported fiscal third-quarter results after the close of trading Wednesday.
  • Earnings and revenue beat estimates.
  • The stock has climbed 34% in the past year and jumped further in extended trading.

Microsoft reported fiscal third-quarter results on Wednesday, and the stock jumped more than 3% on better-than-expected earnings and revenue.

Here are the key numbers:

Earnings: $1.14 per share, excluding certain items, vs. $1.00 as expected by analysts, according to Refinitiv.
Revenue: $30.6 billion vs. $29.84 billion as expected by analysts, according to Refinitiv.
Microsoft shares are trading near a record after rallying 34% over the past year. The stock climbed past $130.50 in extended trading, pushing the market cap over $1 trillion.

Sales jumped 14% in the latest quarter, driven by the company’s transition to the public cloud as more large businesses offload their servers and data storage to Azure infrastructure. Gross margin, or the percentage of revenue left after accounting for the costs of goods sold, was 66.7% up from 65.4% a year earlier. Net income rose 19% to $8.8 billion.

Azure’s revenue surged 73%. Microsoft’s commercial cloud business, which includes Azure, grew 41% in the quarter to $9.6 billion. While Azure is still much smaller than rival Amazon Web Service, Stifel analysts say it’s growing faster than AWS was at a similar size.

“We continue to believe the shift to the cloud will be additive to Microsoft given a broader portfolio of products with deeper functionality as well as Microsoft’s ability to enter new categories where it did not compete previously,” wrote Stifel’s Brad Reback, who has a buy rating on the stock.

Microsoft said on the earnings call that revenue in the fiscal fourth quarter will be $32.2 billion to $32.9 billion. Analysts expected $32.6 billion, according to Refinitiv.

Microsoft and AWS are in the last stages of competing for a $10 billion Department of Defense contract, known as JEDI, after IBM and Oracle were recently ruled out. Last week, Wedbush analysts said momentum has been moving toward Microsoft CEO Satya Nadella in his effort to catch Amazon’s Jeff Bezos.

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