Microsoft stock plunges on an earnings and revenue beat, thanks to less-than-expected revenue from their Intelligent Cloud division.

Leading into Microsoft’s after-hours Tuesday earnings, analysts expected earnings of $2.94 per share and revenue of $64.5 billion.

The results? $2.95 and $64.7B, beats of $0.01 and $200 million. So why is the stock down?

Intelligent Cloud revenue (i.e., AI-related products included) was only up to $28.5 billion, a $200 million miss compared to analyst estimates. So, although the company beat earnings by $200 million, billions of dollars in stockholder equity was wiped out because one segment missed by $200 million. Interesting.

Earnings Report

Microsoft Corp. announced robust financial results for the fourth quarter, which ended June 30, 2024, driven by strong performance in its cloud services and strategic business segments.

Financial Highlights

• Revenue: $64.7 billion, up 15% year-over-year (16% in constant currency).
• Operating Income: $27.9 billion, up 15% year-over-year (16% in constant currency).
• Net Income: $22.0 billion, up 10% year-over-year (11% in constant currency).
• Diluted Earnings Per Share: $2.95, up 10% year-over-year (11% in constant currency).

CEO and CFO Statements

Satya Nadella, Chairman and CEO, highlighted the company’s continuous innovation and customer trust, emphasizing Microsoft’s leadership in the AI era. Amy Hood, EVP and CFO, noted the record bookings and strong growth in Microsoft Cloud revenue.

Segment Performance

Productivity and Business Processes:

• Revenue: $20.3 billion, up 11% (12% in constant currency).
• Office Commercial products and cloud services revenue increased by 12% (13% in constant currency), driven by Office 365 Commercial growth of 13% (14% in constant currency).
• LinkedIn revenue grew by 10% (9% in constant currency).
• Dynamics products and cloud services revenue increased by 16%, with Dynamics 365 revenue up 19% (20% in constant currency).

Intelligent Cloud:

• Revenue: $28.5 billion, up 19% (20% in constant currency).
• Server products and cloud services revenue grew by 21% (22% in constant currency), driven by Azure and other cloud services revenue growth of 29% (30% in constant currency).

More Personal Computing:

• Revenue: $15.9 billion, up 14% (15% in constant currency).
• Windows revenue increased by 7% (8% in constant currency), with Windows OEM revenue up 4% and Windows Commercial products and cloud services revenue up 11% (12% in constant currency).
• Xbox content and services revenue surged by 61%, significantly impacted by the Activision acquisition.
• Search and news advertising revenue, excluding traffic acquisition costs, increased by 19%.

Shareholder Returns

Microsoft returned $8.4 billion to shareholders through share repurchases and dividends during the fourth quarter.

Fiscal Year 2024 Results

• Revenue: $245.1 billion, up 16% year-over-year (15% in constant currency).
• Operating Income: $109.4 billion, up 24% year-over-year (21% in constant currency).
• Net Income: $88.1 billion, up 22% year-over-year (21% in constant currency).
• Diluted Earnings Per Share: $11.80, up 22% year-over-year (21% in constant currency).

Microsoft stock plunges on an earnings and revenue beat, thanks to less-than-expected revenue from their Intelligent Cloud division.

Leading into Microsoft’s after-hours Tuesday earnings, analysts expected earnings of $2.94 per share and revenue of $64.5 billion.

The results? $2.95 and $64.7B, beats of $0.01 and $200 million. So why is the stock down?

Intelligent Cloud revenue (i.e., AI-related products included) was only up to $28.5 billion, a $200 million miss compared to analyst estimates. So, although the company beat earnings by $200 million, billions of dollars in stockholder equity was wiped out because one segment missed by $200 million. Interesting.

Earnings Report

Microsoft Corp. announced robust financial results for the fourth quarter, which ended June 30, 2024, driven by strong performance in its cloud services and strategic business segments.

Financial Highlights

• Revenue: $64.7 billion, up 15% year-over-year (16% in constant currency).
• Operating Income: $27.9 billion, up 15% year-over-year (16% in constant currency).
• Net Income: $22.0 billion, up 10% year-over-year (11% in constant currency).
• Diluted Earnings Per Share: $2.95, up 10% year-over-year (11% in constant currency).

CEO and CFO Statements

Satya Nadella, Chairman and CEO, highlighted the company’s continuous innovation and customer trust, emphasizing Microsoft’s leadership in the AI era. Amy Hood, EVP and CFO, noted the record bookings and strong growth in Microsoft Cloud revenue.

Segment Performance

Productivity and Business Processes:

• Revenue: $20.3 billion, up 11% (12% in constant currency).
• Office Commercial products and cloud services revenue increased by 12% (13% in constant currency), driven by Office 365 Commercial growth of 13% (14% in constant currency).
• LinkedIn revenue grew by 10% (9% in constant currency).
• Dynamics products and cloud services revenue increased by 16%, with Dynamics 365 revenue up 19% (20% in constant currency).

Intelligent Cloud:

• Revenue: $28.5 billion, up 19% (20% in constant currency).
• Server products and cloud services revenue grew by 21% (22% in constant currency), driven by Azure and other cloud services revenue growth of 29% (30% in constant currency).

More Personal Computing:

• Revenue: $15.9 billion, up 14% (15% in constant currency).
• Windows revenue increased by 7% (8% in constant currency), with Windows OEM revenue up 4% and Windows Commercial products and cloud services revenue up 11% (12% in constant currency).
• Xbox content and services revenue surged by 61%, significantly impacted by the Activision acquisition.
• Search and news advertising revenue, excluding traffic acquisition costs, increased by 19%.

Shareholder Returns

Microsoft returned $8.4 billion to shareholders through share repurchases and dividends during the fourth quarter.

Fiscal Year 2024 Results

• Revenue: $245.1 billion, up 16% year-over-year (15% in constant currency).
• Operating Income: $109.4 billion, up 24% year-over-year (21% in constant currency).
• Net Income: $88.1 billion, up 22% year-over-year (21% in constant currency).
• Diluted Earnings Per Share: $11.80, up 22% year-over-year (21% in constant currency).