Microsoft Soars to $1 Trillion Valuation on Estimates Beat

On Wednesday, Microsoft reported its fiscal third-quarter results, revealing both earnings and revenue that were better than expected; and that resulted in shares jumping more than 3 percent. Looking more closely at the numbers, earnings—excluding certain items—came in at $1.14 per share, up from the expected $1.00 that was expected. Revenue registered at $30.6 billion, up from the expected $29.84 billion. 

With that, shares of Microsoft stock hit trade levels near a record high after a 34 percent rally on the year.  In all, then, the stock lifted past $130.50 in extended trading and that pushed Microsoft’s market capitalization past $1 trillion. 

This means Microsoft is now part of the elite trillion dollar valuation club.

Microsoft’s performance comes as a result of a 14 percent jump in sales in the last quarter, alone.  Much of this was driven by a healthy transition from hardware to public cloud as more and more large businesses are looking to offload their local servers and data storage, and migrating to the Azure infrastructure. 

Microsoft chief financial officer Amy Hood notes, “Demand for our cloud offerings drove commercial cloud revenue to $9.6 billion this quarter, up 41 percent year-over-year.  We continue to drive growth in revenue and operating income with consistent execution from our sales teams and partners and targeted strategic investments.” 

Indeed, revenues from Azure, alone, grew by an impressive 73 percent.  In addition, Dynamics 365 sales grew 43 percent, with Office 365 Commercial sales up 30 percent.  Xbox software and gaming services revenue also rose 12 percent from the last year. All in all, overall sales jumped 14 percent in the last quarter of the year with gross margin up from 65.4 percent last year to 66.7 percent this year. Gross margin is the percentage of revenue left after taking the costs of goods sold into account.  Net income also rose 19 percent to $8.8 billion. 

On top of this, in an earnings call Microsoft said that fiscal fourth quarter revenue will range between $32.2 billion to $32.9 billion.  This is quite aligned with analyst expectations, which assessed the beat would be $32.6 billion.

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