Microsoft beats Q1 2018 analysts view, Azure revenues up 90%

After posting another quarter of exceptional results, the stock of Microsoft Corporation (NASDAQ: MSFT) opened with a positive technical gap of about 4% to trade at $83 levels on October 27.

For the past one week, the stock is consolidating at those levels. On the basis of exceptional fiscal 2018 first-quarter results and a milestone of $20 billion annual run rate achieved in its commercial cloud business, we anticipate the stock of Microsoft to begin another rally soon.

The Redmond, Washington-based company recorded Q1 2018 revenues of $24.538 billion, up 12% from $21.928 billion in the first-quarter of fiscal 2017.

Net income during the July-September 2017 quarter grew to $6.576 billion, or $0.84 per share, from $5.667 billion, or $0.72 per share, in the year-ago period. The Wall Street analysts had expected Microsoft to report first-quarter earnings of $0.72 per share on revenues of $23.56 billion.

Microsoft

Segment wise, Productivity and Business revenue increased 28% to $8.238 billion. The sub-divisions under this segment performed as follows:

  • Office commercial products and cloud services revenue increased 10% y-o-y. In particular, Office 365 commercial revenue grew 42%.
  • Office 365 consumer subscribers increased to 28 million.
  • Dynamics products and cloud services revenue jumped 13%, mainly driven by Dynamics 365 revenue growth of 69%.
  • LinkedIn revenues remained flat at $1.10 billion during the quarter.

Intelligent Cloud revenue increased 14% y-o- y to $6.922 billion. The sub-divisions under this segment performed as follows:

  • Aided by a 90% increase in Azure revenue growth, Server products and cloud services revenue rose 17%.
  • Enterprise Services revenue increased by 1% due to a growth in Premier Support Services.

More Personal Computing revenue remained almost flat at $9.40 billion. The sub-divisions performed as follows:

  • Windows OEM revenue grew 4% and exceeded the overall PC market growth.
  • Windows commercial products and cloud services revenue increased 7%, mainly due to annuity revenue growth.
  • Higher revenue per search and increase in search volume enabled Search advertising revenue to register a growth of 15%, excluding traffic acquisition costs.
  • Surface revenue increased 12%, mainly due to an increase in the sales of the new Surface laptop.
  • Gaming revenue increased 1%, driven by a 21% growth in Xbox software and services revenue. However, it was offset by a lower hardware revenue.
  • All the three segments exceeded Street Account expectations.

    Microsoft announced that it exceeded its goal of $20 billion in annualized revenue run rate for its commercial cloud business, which includes the Office 365 subscription, Dynamics 365 apps, and Azure cloud. The company revealed that the commercial cloud run rate hit $20.4 billion in the first-quarter of 2018.

    On the basis of strong quarterly results, investment research firm Oppenheimer Holdings, Inc. raised the target price of Microsoft to $92. Oppenheimer currently has an “outperform” rating for the stock of Microsoft. Thus, on the basis, of strong first-quarter results, growth across all segments, and exceptional performance of cloud computing business, we anticipate Microsoft to remain in an uptrend in the short-term.

    The stock is currently trading above its 50-period moving average. Further, the +DI leg of the ADX indicator is moving above the –DI leg. That confirms the bullishness in the chart. The price chart also indicates a strong support at 83 levels. On the upside, the next resistance is expected at about 92.

    Microsoft Stock Price: November 8th 2017

    Microsoft Stock Price: November 8th 2017

    As a speculator, we may use the analysis to invest in a call option offered by a reputed binary broker. The stock should be trading at about $83 at the time of investment. Further, the call option should remain active for a period of one week.


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