Microsoft Stock Falls on Low Guidance, Slowing Azure Growth

Microsoft Stock Falls on Low Guidance, Slowing Azure Growth

Microsoft (MSFT) fell on Wednesday after the software giant slightly beat Wall Street targets for its fiscal first quarter, but was well below views for the current period. MSFT stock fell more than 7% on the news.


The Redmond, Wash.-based company said late Tuesday that it earned $2.35 a share on sales of $50.1 billion in the quarter ended Sept. 30. Analysts polled by FactSet had expected Microsoft to earn $2.31 a share on sales of $49.7 billion. Year-over-year, Microsoft’s profits increased 4%, while sales increased 11%.

Microsoft credited its cloud services for the better-than-expected results. However, its Azure infrastructure business grew at a slightly slower pace than expected.

“Microsoft Cloud revenue was $25.7 billion this quarter, up 24% (up 31% in constant currency) year-over-year,” said Chief Financial Officer Amy Hood said in a press release. “We continue to see healthy demand across our business operations, including another quarter of strong bookings, as we deliver compelling value to customers.”

Microsoft Stock drops late

For the current quarter, Microsoft forecasts sales of $52.35 billion to $53.35 billion. The midpoint of $52.85 billion was well below Wall Street’s target of $56.2 billion for the December quarter.

In morning trading in the stock market today, MSFT stock fell 7.1% to 232.80. During Tuesday’s regular session, MSFT stock rose 1.4% to close at 250.66.

Of Microsoft’s three business segments, Intelligent Cloud was the best performer in the September quarter. Segment revenue grew 20% year-over-year to $20.3 billion. The unit includes server products and cloud services such as Azure.

Microsoft’s Productivity and Business Processes unit saw sales rise 9% to $16.5 billion. The division includes Office productivity software as well as Dynamics and LinkedIn businesses.

Microsoft’s More Personal Computing unit lagged, with revenue down a fraction to $13.3 billion. The unit includes Windows PC software, Xbox video games, Surface computers, Internet search and advertising.

MSFT stock ranks first of the bunch

Prior to Microsoft’s earnings report, analysts were concerned that a weaker personal computer market could hamper its results.

Another PC-centric stock, International Logitech (LOGI), rose on Tuesday after the peripherals maker hit Wall Street’s profit target for the September quarter and maintained its sales and profit targets for its fiscal year 2023. However, sales in the September quarter ran out of views as exchange rates took a bite out.

Logitech stock jumped 11% to 50.64 on Tuesday.

According to IBD Stock Checkup, MSFT stock ranks first among seven stocks in IBD’s Computer Software-Desktop industry group. But it has a mediocre IBD composite rating of 65 out of 99.

IBD’s Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a composite rating of 90 or higher.

Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.


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