Microsoft Corp. hit Wall Street’s targets for cloud services revenue, but that wasn’t enough for some of the most optimistic investors and shares fell 5% in extended trading.
Overall revenue beat expectations, but the outperformance hasn’t come to the Azure cloud service. Azure revenue growth of 46% was in line with analysts’ expectations compiled by Visible Alpha. Wedbush analyst Dan Ives said in a note that the stock dropped partly because Azure revenue didn’t affect Wall Street’s unofficial bullish forecast of 48%.
“It all comes down to guidance on the call it will be the focus for Street to measure broader enterprise/cloud spend over the rest of 2022 against the backdrop of this white finger,” he wrote.
Ives called Microsoft’s performance “strong” and a sign that the company “continues to see strength in the field”.
Microsoft has become one of the world’s most valuable companies on corporate software and services, especially its cloud services and the Web traffic of its Outlook email and calendar software, known as Office 365.
The switch to work and learn from home during the pandemic has drawn more users to Microsoft’s Office communication software and services, such as Teams and Office 365. And demand for cloud services from Microsoft and rivals Amazon.com Inc. and Alphabet Inc. grew as the pandemic raged. Accelerated the online shift.
Revenue from Microsoft’s largest segment, which provides cloud services and includes Azure, its flagship cloud offering, grew 26%, while its Office 365 services business grew 19% in the quarter.
Net income rose to $18.77 billion, or $2.48 per share, from $15.46 billion, or $2.03 per share, a year ago.
The company said revenue rose to $51.73 billion in the three months ended December 31, up from $43.08 billion a year ago.
Analysts were expecting an average of $50.88 billion in revenue, according to Refinitiv data.
Investors are also eyeing Microsoft’s proposed $69 billion acquisition of Activision Blizzard Inc., announced on January 18, as a major expansion for its gaming division. It also broadens the company’s efforts at merging the so-called metaverse, or online and offline worlds, which will have corporate and consumer applications.
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