Microsoft Q3 FY2022 Earnings Report Recap

MSFT beat on earnings and revenue

Key Takeaways

  • Microsoft's Xbox content and services revenue rose 6% year over year, beating analysts' expectations.
  • Gaming revenue is a key metric gauging the amount of sales Microsoft generates from its video game hardware, software, and related services.
  • Microsoft beat analyst predictions on both earnings per share and revenue.
Microsoft Earnings Results
Metric Beat/Miss/Match Reported Value Analysts' Prediction
Adjusted Earnings Per Share Beat $2.22 $2.18
Revenue Beat $49.4B $49.0B
Constant currency YOY growth, Xbox content and services revenue Beat 6.0% 5.2%

Source: Predictions based on analysts' consensus from Visible Alpha

Microsoft (MSFT) Financial Results: Analysis

Microsoft Corporation (MSFT) reported Q3 FY 2022 earnings that beat analyst expectations. Earnings per share (EPS) came in at $2.22, beating analyst predictions. Notably, Microsoft did not make any significant adjustments to EPS this quarter, although the acquisition of Nuance dropped its EPS by $0.01. Revenue grew 18% YOY to $49.4 billion, beating expectations. Year-over-year (YOY) growth in constant currency of Microsoft's Xbox content and services revenue also topped analyst predictions.

Note that Microsoft's 2021 fiscal year (FY) ended June 30, 2021. Its current earnings report is thus for its fiscal third quarter, which coincides with the first quarter of the calendar year.

MSFT Xbox Content and Services Revenue Growth

Microsoft's Xbox content and services revenue climbed by 6% YOY on a constant currency basis. Analysts had predicted 5.2% YOY growth in this area. This revenue figure is a key metric gauging the amount of sales the company generates from its video game hardware, software, and related services.

Microsoft is seeking to expand its video game offerings, as its recent announcement to acquire Activision Blizzard, Inc. (ATVI)—maker of popular games like Call of Duty and World of Warcraft—makes abundantly clear. Microsoft agreed to acquire Activision Blizzard for $68.7 billion. When completed, this will be the company's largest acquisition ever, and Microsoft said that the deal would make it the third-largest gaming company by revenue.

The company also highlighted its cloud platform as a key driver of performance for the quarter. CFO Amy Hood said that Microsoft Cloud revenue was $23.4 billion, up 32% year over year, thanks to "continued customer commitment."

MSFT Stock Performance

Microsoft shares were trading down about 0.7% following the earnings release, as of this writing. The company's stock has outperformed the broader market in the past year, providing one-year trailing total returns of 4.2%, compared with -0.3% for the S&P 500.

MSFT Earnings Call Recap

On a call with analysts after results were announced, Chief Financial Officer (CFO) Amy Hood said that excluding the impact of currency fluctuations, Azure's revenue growth will be 2% slower in the company's fiscal fourth quarter compared with the previous period. Despite that slower pace, it still would be higher than many analysts’ estimates, said Dan Ives, an analyst at Wedbush.

Microsoft's next earnings report (for Q4 FY 2022) is expected to be released on July 21, 2022.

Article Sources

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  2. Microsoft Corp. "Microsoft Cloud Strength Fuels Third Quarter Results."

  3. Microsoft Corp. "Microsoft to Acquire Activision Blizzard to Bring the Joy and Community of Gaming to Everyone, Across Every Device."

  4. The Wall Street Journal. "Microsoft to Buy Activision Blizzard in All-Cash Deal Valued at $75 Billion."

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