Microsoft (MSFT) Beats Earnings Estimates Handily

Microsoft Corporation (MSFT) posted strong results for the quarter that ended December 31, 2020, which is the company’s second quarter fiscal year 2021, easily beating analyst estimates and representing a large Year after year earnings. Earnings per share (EPS) were $2.03, 23.8% better than the estimate the deal of $1.64 and 34.4% more than the figure of $1.51 earned during the same period a year earlier.

Total revenue was $43.08 billion, beating the consensus estimate of $40.18 billion by 7.2% and representing a 16.7% increase from the figure of 36 .91 billion recorded in the same period a year ago.

  • Microsoft released results for the second quarter of fiscal 2021 on January 26, 2021. This is the quarter that ended December 31, 2020.
  • EPS rose sharply from the prior year and significantly exceeded the consensus estimate. Revenues also showed strong growth and exceeded estimates.
  • A wave of “digital transformation” and Microsoft’s strong position in cloud service were cited as key drivers by the company.

Areas of strength

In its earnings release, Microsoft cited several areas of particular strength that represented major revenue improvements over the same period a year earlier. These included:

  • Office Commercial products and cloud services revenue increased 11%, driven by Office 365 Commercial revenue growth of 21%.
  • Revenue for Office Consumer products and cloud services increased 7%, and Microsoft 365 Consumer subscribers grew to 47.5 million.
  • LinkedIn revenue grew 23%.
  • Dynamics products and cloud services revenue grew 21%, driven by Dynamics 365 revenue growth of 39%.
  • Server products and cloud services revenue grew 26%, driven by Azure revenue growth of 50%.
  • Revenue from Xbox content and services increased by 40%.

Commenting on the results, Microsoft CEO Satya Nadella said, “What we’ve seen over the past year is the dawn of a second wave of digital transformation sweeping through every business and every industry. Building their own digital capability is the new currency that drives the resilience of every organization. and growth. Microsoft is driving this change with the world’s largest and most comprehensive cloud platform.”

Increased capital returns to shareholders

Microsoft returned $10 billion to shareholders via share buybacks and dividends in the second quarter of fiscal 2021, which represents an increase of 18% compared to the same period of the previous year.

Importance for investors

While CEO Nadella attributes Microsoft’s strong results to “digital transformation” and positioning his company as a leading cloud services provider, he didn’t explain why demand for cloud services is growing so rapidly. A reasonable response is the explosive growth of work-from-home and home-entertainment arrangements in response to COVID-19.

However, it is unclear how long, if at all, similar growth rates will be sustainable in the future. It is highly likely that 2020 represented a leap forward in the underlying drivers, to a degree that may not be repeatable in 2021.

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