Shares of Microsoft Jump on Forecast for Revenue

Shares of Microsoft briefly dropped, but rebounded and then surged on Thursday following guidance after the software giant announced fiscal fourth quarter earnings that were strong.

Microsoft said earnings reached $1.13 a share, excluding special items, while analysts were expecting earnings of $1.08 a share. Revenue was expected to be $29.21 billion, but the company posted $30.09 billion in revenue.

Microsoft CFO Amy Hold said that the company is expecting between $27.35 billion and $28.05 billion in total revenue, while analysts expected a forecast of $27.38 billion for revenue, below the company’s midpoint for guidance.

Microsoft shares increased on Hood’s news by over 4% above its Thursday closing price.

Over the last few years CEO Satya Nadella has been focusing attention for the investor around the company’s Commercial Cloud, which is a group of products that include commercial tiers for Office 365, Dynamics 365 and its public cloud Azure.

The Commercial Cloud generated revenue of $6.9 billion for Microsoft, which was an increase of 58%. Analysts were expecting Commercial Cloud to grow 46%.

Microsoft, which is normal, did not release exact revenue for Azure, but said that it increased by 89%. Analysts were expecting Azure would yield approximately $2.05 billion of the revenue of Commercial Cloud, with growth of 80% year over year, or down from 93% for the previous quarter.

Microsoft’s gross margin in its Intelligent Cloud segment, which Azure is part of along with products such as SQL Server and System Center, was improved.

The improvement in margin is thanks for the most part to Azure though it was almost completely offset by increased sales mix in Azure.

Intelligent Cloud total $9.6 billion for revenue, which was up 23% from last year during the same period. Analysts were expecting revenue from Intelligent Cloud to reach $9.09 billion.

Microsoft’s More Personal Computing, which contains Windows, gaming, search advertising and devices, is bigger and for the fourth quarter generated revenue of $10.8 billion which was an increase of 17% and higher than analysts’ consensus of $10.41 billion.

The company’s Productivity and Business Processes segment that includes LinkedIn, Office and Dynamics ended just higher than expectations with revenue of $9.67 billion, increasing by 13%.

The analyst numbers were just higher at $9.68 billion. LinkedIn alone generated over $1.46 billion to revenue for the quarter or about 37% more than the previous year.

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