Microsoft stock in focus as cloud services revenue drives fourth quarter results

No company is better positioned than Microsoft to help organizations deliver on their digital imperative says Satya Nadella, chairman and chief executive officer of Microsoft.

Microsoft stock in focus as cloud services revenue drives fourth quarter results
The company’s forecast seemed to address investors’ concerns and the stock looks to move higher from the current levels.

Microsoft Corp. has announced the results for the quarter ended June 30, 2022, showing revenue of $51.9 billion, an increase of 12%. In constant currency terms, the revenue is up by 16%. The Operating income was $20.5 billion and it increased by 8% (up 14% in constant currency) while the net income was $16.7 billion and increased by 2% (up 7% in constant currency). The Diluted earnings per share were $2.23 and increased by 3% (up 8% in constant currency).

The company’s forecast seemed to address investors’ concerns and the stock looks to move higher from the current levels. MSFT closed 2.68 per cent lower but is up by over 3 per cent in the pre-market session today. Microsoft Corp (MSFT) with a Market Cap of about $1935.80 Billion is trading at around $260. Over the last 1-year, MSFT share is down by almost 12% but since January the stock has shed almost 25%. The 52 Week High and 52 Week Low of Microsoft stock is $349.67 and $241.51 respectively.

Technology stocks seemed to be out of favor over the last few months. Nasdaq 100 dominated by tech stocks is down by nearly 25 per cent this year. Although there are recessionary fears and talk of a slowdown in the economy, Microsoft owing to its business software and cloud-computing offerings is expected to remain a favorite of investors.

“We see real opportunity to help every customer in every industry use digital technology to overcome today’s challenges and emerge stronger,” said Satya Nadella, chairman and chief executive officer of Microsoft. “No company is better positioned than Microsoft to help organizations deliver on their digital imperative – so they can do more with less.”

“In a dynamic environment, we saw strong demand, took share, and increased customer commitment to our cloud platform. Commercial bookings grew 25% and Microsoft Cloud revenue was $25 billion, up 28% year over year,” said Amy Hood, executive vice president and chief financial officer of Microsoft. “As we begin a new fiscal year, we remain committed to balancing operational discipline with continued investments in key strategic areas to drive future growth.”

What impacted results

In the fourth quarter of the fiscal year 2022, evolving macroeconomic conditions and other unforeseen items had an impact on financial results. Unfavorable foreign exchange rate movement within the quarter negatively impacted revenue and diluted earnings per share $(595) million and $(0.04), respectively.

Extended production shutdowns in China that continued through May and a deteriorating PC market in June contributed to a negative impact on Windows OEM revenue of over $(300) million.

Reductions in advertising spending contributed to a negative impact on LinkedIn as well as Search and news advertising revenue of over $(100) million.

With the ongoing war in Ukraine, we made the decision to significantly scale down our operations in Russia. As a result, we recorded operating expenses of $126 million related to bad debt expenses, asset impairments, and severance.

As part of a strategic realignment of our business groups, we recorded employee severance expenses of $113 million, excluding Russia.

Business Highlights

Revenue in Productivity and Business Processes was $16.6 billion and increased 13% (up 17% in constant currency). Office Commercial products and cloud services revenue increased 9% (up 13% in constant currency) driven by Office 365 Commercial revenue growth of 15% (up 19% in constant currency). Office Consumer products and cloud services revenue increased 9% (up 12% in constant currency) and Microsoft 365 Consumer subscribers grew to 59.7 million.

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