Market Overview

Microsoft's Azure Segment Steps Up To Deliver A Big Q1 Surprise

Share:
Microsoft's Azure Segment Steps Up To Deliver A Big Q1 Surprise

Goldman Sachs said strong momentum in Azure helped Microsoft Corporation (NASDAQ: MSFT) to report its first-quarter results above Street view.

For the first quarter, Microsoft reported EPS of $0.76, which was $0.08 ahead of Street, and non-GAAP revenue of $22.3 billion (non-GAAP) also topped Street estimate of $ $21.7 billion. The company beat consensus revenue in each of its three segments, with the largest outperformance in the More Personal Computing segment.

“In line with our field checks, the positive surprise in the quarter was related to the company’s Azure segment, which saw yoy revenue growth accelerate to 116 percent from 102 percent as the company’s hybrid cloud momentum continues to build, resulting in an annualized revenue run rate of $3.5 billion,” analyst Heather Bellini wrote in a note.

Related Link: Microsoft Doing All The Right Things To Repeat Q1 Success In Q2

On the flip side, Microsoft guided its second quarter meaningfully lower than consensus estimates. To be specific, Bellini said for the tenth time in the past 13 quarters, the company guided out-quarter revenue and non-GAAP EPS below the Street at the midpoint, at $24.7 billion–$25.5 billion and $0.74–$0.79 versus consensus of $25.8 billion and $0.79, respectively. Goldman sees EPS of $0.71.

However, Bellini raised her FY17 non-GAAP revenue, which excludes the impact related to the Windows 10 deferral, estimate to $94.6 billion (prior $94.3 billion) versus consensus prior to the print of $93.9 billion. The analyst also increased her non-GAAP EPS view to $2.95 (prior $2.82) versus the Street at $2.90.

The analyst maintains her Neutral rating, but upped her 12-month price target to $60 from $57.

Shares of Microsoft closed Thursday’s trading at $57.25. In the pre-market hours Friday, they gained 5.97 percent to $60.67. At about $61 level, Microsoft trades at 21.4x and 21.1x GS’ CY16 and CY17 non-GAAP EPS estimates of $2.85 and $2.89 (prior $2.72 and $2.97).

Full ratings data available on Benzinga Pro.

Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email feedback@benzinga.com with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!

Latest Ratings for MSFT

DateFirmActionFromTo
Nov 2020KeyBancInitiates Coverage OnOverweight
Nov 2020OppenheimerUpgradesPerformOutperform
Oct 2020Deutsche BankMaintainsBuy

View More Analyst Ratings for MSFT
View the Latest Analyst Ratings

 

Related Articles (MSFT)

View Comments and Join the Discussion!

Posted-In: Analyst Color Earnings News Guidance Price Target Reiteration Analyst Ratings Movers

Latest Ratings

StockFirmActionPT
ESTCCanaccord GenuityMaintains150.0
AVAVCanaccord GenuityMaintains98.0
OKTACanaccord GenuityMaintains250.0
SNOWCanaccord GenuityMaintains275.0
RCMSVB LeerinkMaintains26.0
View the Latest Analytics Ratings
Don't Miss Any Updates!
News Directly in Your Inbox
Subscribe to:
Benzinga Premarket Activity
Get pre-market outlook, mid-day update and after-market roundup emails in your inbox.
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Fintech Focus
A daily collection of all things fintech, interesting developments and market updates.
Thank You

Thank you for subscribing! If you have any questions feel free to call us at 1-877-440-ZING or email us at vipaccounts@benzinga.com