Microsoft surges following Q2 earnings, Q3 guidance
HJBC/iStock Editorial via Getty Images


Microsoft (NASDAQ:MSFT) shares surged early Wednesday after it posted second-quarter earnings that were better than expected and gave guidance that was above expectations, driven by strength in the cloud.
Redmond, Washington-based Microsoft (MSFT) said it earned $2.48 a share on $51.7 billion in revenue, up 20% year-over-year. The consensus from Wall Street analysts called for Microsoft to earn $2.32 per share on $50.78 billion in revenue, up 17.9% year-over-year.

Azure, which has been a focal point for investors, saw revenue rise 46% year-over-year, though Microsoft did not break it down in dollar terms. Microsoft revenue from Productivity and Business Processes was $15.9 billion, up 19% year-over-year, aided by Office 365, which now has 56.4 million subscribers. Revenue from Intelligent Cloud was $18.3 billion, up 26% year-over-year, while More Personal Computing, which includes Windows, rose 15% year-over-year to $17.5 billion.
In a note to investors, Bank of America analyst Brad Sills noted that Azure revenue growth decelerated somewhat in second-quarter, at 46%, down from 48%, but the outlook for reacceleration in the third-quarter "suggests that underlying demand and consumption remains solid."
"Overall, Q2 results validate our view that the company is likely to sustain healthy high teens FCF growth from sustained growth in Azure, Office 365 and datacenter scale and pricing power," Sills added, who reiterated his buy rating and $365 price target.
For the third-quarter, Microsoft Chief Financial Officer Amy Hood said the company expects to generate revenue between $48.5 billion and $49.3 billion, with operating margins rising slightly.
Microsoft (MSFT) shares are soaring in pre-market trading, gaining more than 3% to $298.50.
Wedbush Securities analyst Dan Ives, who earlier this month said that Microsoft (MSFT) was a "rock of Gibraltar" stock that would save tech, noted that last night's earnings call was a "white knuckle" moment in financial markets, with all of Wall Street watching and relieved by the cloud guidance.
"[Satya] Nadella & Co. gave a robust cloud guidance 'for the ages' that will calm Street nerves this morning and was a bullish data point for [Microsoft] and importantly the whole tech sector moving forward," Ives wrote. "Our unwavering view is that despite the fear in the air given the Fed tightening backdrop and valuations falling off a cliff in tech, underlying digital transformation growth is accelerating and not decelerating into 2022 as part of this 4th Industrial Revolution."
Earlier this month, Microsoft announced that it is buying Activision (NASDAQ:ATVI) for $68.7 billion in one of the biggest moves it has ever made in the video game market, with the deal expected to close in 2023.