Microsoft Soars On Blowout Earnings Thanks To Surging Cloud Revenue; Returns $10BN To Shareholders Heading into today's most important earnings release, Wall Street has been bullish on Microsoft - the one company among the FAAMGs that many view as immune to antitrust overtures from the government as it already went through all that - and expects it to post record quarterly sales underpinned by pandemic-fueled demand for videogaming and accelerated adoption of its cloud-computing services, something its share price which was already trading at an all time high clearly reflected. Like so many of its FAAMG peers, the remote work era has been a boon for Microsoft. In addition to its videogaming and cloud-computing products, the company has seen strong sales for its Surface laptops as people bought devices to work remotely and enable distance learning. And use of Microsoft’s Teams workplace collaboration software that includes text chat and videoconferencing, and has been a priority for Chief Executive Satya Nadella, has jumped during the pandemic. Microsoft shares have risen more than 37% over the past year as shown above. The software giant’s fiscal Q2 earnings reflect a period when demand for the latest versions of its Xbox videogame consoles has outstripped supply. Wall Street expects Microsoft to post $40.2 billion in sales, the highest quarterly revenue ever, and up 9% Y/Y. Net income is expected to jump by $1 billion to $12.6 billion. So with that in mind what did Microsoft report? Well, in a word - it was a blowout. Q2 Revenue $43.1BN, smashing expectations of $40.2 Q2 EPS $2.03. beating expectations of $1.64 All the supporting data was strong too, with an emphasis on Server Products and Cloud services revenue which surged +26% driven by a whopping 50% in Microsoft's Azure cloud offering. Server products and cloud services revenue increased 26% (up 24% in constant currency) driven by Azure revenue growth of 50% (up 48% in constant currency) Intelligent Cloud revenue $14.60 billion, +23% y/y, estimate $13.75 billion Productivity and Business Processes revenue $13.35 billion, +13% y/y, estimate $12.94 billion More Personal Computing revenue $15.12 billion, +14% y/y, estimate $13.55 billion Capital expenditure $4.17 billion, +18% y/y, below expectations of $4.79 billion Operating income $17.90 billion, +29% y/y, estimate $14.84 billion (range $14.43 billion to $15.47 billion) “Accelerating demand for our differentiated offerings drove commercial cloud revenue to $16.7 billion, up 34% year over year,” said Amy Hood, executive vice president and chief financial officer of Microsoft. “We continue to benefit from our investments in strategic, high-growth areas.” And just in case the stellar results were not enough, the company also returned $10 billion to shareholders in the form of share repurchases and dividends in the second quarter of fiscal year 2021, an increase of 18% compared to the second quarter of fiscal year 2020. The stock, not surprisingly, was more than 5% higher after the close, rising to new record highs. Tyler Durden Tue, 01/26/2021 - 16:13