Microsoft Earnings Results
Metric Beat/Miss/Match Reported Value Analysts' Prediction
Adjusted EPS Beat $1.95 $1.78
Revenue Beat $41.7B $41.1B 
YOY Growth in Azure Revenue Beat 50% 46.3% 

Source: Predictions based on analysts' consensus from Visible Alpha

Key Takeaways

  • Azure revenue grew 50% year over year, beating analysts' estimates.
  • Azure is Microsoft's cloud computing platform, which comprises about 20% of the total global cloud market.
  • Microsoft expects its Intelligent Cloud segment revenue to rise to between $16.2 billion and $16.45 billion in its fiscal fourth quarter.

Microsoft (MSFT) Financial Results: Analysis

Microsoft Corporation (MSFT) reported Q3 FY 2021 earnings that beat analyst expectations. Adjusted earnings per share (EPS) came in well above what analysts had forecast. Revenue also beat analyst estimates. Microsoft's Azure cloud revenue grew 50% year over year (YOY), surpassing expectations. Microsoft does not disclose Azure revenue in dollars in its earnings report. The company's shares were down more than 3% in after-hours trading. Over the past year, Microsoft's shares have provided a total return of 52.1%, above the S&P 500's total return of 45.5%.

MSFT Azure Revenue

Azure is Microsoft's cloud computing platform that offers developers, IT professionals, and enterprises a suite of tools and services that can be used for networking, storage, mobile and web application services, artificial intelligence (AI), Internet of Things (IoT), and a range of other computing needs. Microsoft's platform captured an approximately 20% share of the global cloud market as of the end of the 2020 calendar year. Azure is second only to Amazon.com, Inc.'s (AMZN) Amazon Web Services in terms of global cloud market share.

Azure's cloud services are only becoming more important as commerce continues to shift online, a trend that has been accelerated by the COVID-19 pandemic. "Over a year into the pandemic, digital adoption curves aren't slowing down," said CEO Satya Nadella. Revenue for Microsoft's Intelligent Cloud segment, which includes Azure, was $15.1 billion, up 23% compared to the year-ago quarter.

While Azure revenue growth accelerated in the company's fiscal third quarter, it had been decelerating before the pandemic. Microsoft believes that growth will eventually slow again as the revenue base from which future growth is measured expands. "We're getting into the law of large numbers," concerning Azure's growth, said Kyle Vikström, a director of investor relations at the company. "We expect over time that it's going to decelerate as numbers get bigger."

Microsoft said that it expects Intelligent Cloud revenue to rise to between $16.2 billion and $16.45 billion in Q4 FY 2021, which ends June 30.

MSFT More Personal Computing

Microsoft's More Personal Computing segment, which includes its Windows operating system, gaming offerings, and computing devices, saw revenue rise 19% in Q3 FY 2021. Growth was driven by content and services for its Xbox gaming console.

Microsoft expects More Personal Computing revenue to rise to between $13.6 billion and $14.0 billion in Q4 FY 2021.

Microsoft's next earnings report (for Q4 FY 2021) is estimated to be released on July 20, 2021.