Tech giant Microsoft Corporation (MSFT) reported fiscal-third quarter earnings on Thursday, April 27th. Judging by the market’s reaction, Microsoft’s quarter was a disappointment. The stock fell 2% after reporting. But, the stock quickly retraced its losses, as investors focused once again on the bigger picture: Microsoft is in growth mode. 

The company’s cloud-based offerings like Office 365 and Azure are growing like weeds. These platforms represent the technology of the future, and will fuel Microsoft’s growth for many years ahead. In the meantime, Microsoft is an excellent dividend stock. It is a Dividend Achiever, a group of 265 companies in the S&P 500 Index that have raised their dividends for 10+ years in a row. You can see the full Dividend Achievers List here.

Investors should not be fooled by the market’s initial reaction: Microsoft’s quarterly report was anything but disappointing. Its hardware sales came up slightly short of expectations, but more importantly, its cloud platform continued its explosive growth.

Quarterly Performance Overview

The highlights of Microsoft’s fiscal third-quarter earnings are as follows:

  • Revenue: $23.56 billion (up 6.3% year-over-year)
  • Earnings-per-share: $0.73 (up 16% year-over-year)
  • Overall, Microsoft had a great quarter. The company generated growth in revenue, gross margin, and earnings-per-share.

    MSFT Summary

    Source: Q3 Earnings Presentation, page 4

    In terms of the expectations heading into Microsoft’s earnings, the company put in a mixed performance. Microsoft’s revenue missed expectations by about $60 million, while earnings-per-share beat estimates by $0.03 per share. A revenue miss of $60 million—for a company that generated more than $23 billion for the quarter—is basically a rounding error. The revenue miss was mostly due to weak performance in Microsoft’s More Personal Computing segment. This segment includes Microsoft’s hardware businesses. Weak phone and Surface tablet sales caused segment revenue to decline 7% year over year. Surface revenue fell 26% for the quarter. As a result, revenue in the More Personal Computing business of $8.84 billion missed analyst expectations of $9.22 billion.

    Print Friendly, PDF & Email