Microsoft reports earnings beat, says A.I. will drive revenue growth
Microsoft shares rose 9% in extended trading on Tuesday after the software maker issued fiscal third-quarter results and quarterly guidance that exceeded analysts’ predictions.
Here’s how the company did:
- Earnings: $2.45 per share, vs. $2.23 per share as expected by analysts, according to Refinitiv.
- Revenue: $52.86 billion, vs. $51.02 billion as expected by analysts, according to Refinitiv.
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For the fiscal fourth quarter, Microsoft finance chief Amy Hood called for $54.85 billion to $55.85 billion in revenue, during a conference call with analysts. The middle of the range, at $55.35 billion, implies 6.7% growth, topping the $54.84 billion consensus among analysts surveyed by Refinitiv. Hood is bullish on artificial intelligence.
“As with any significant platform shift, it starts with innovation, and we’re excited about the early feedback and demand signals from the AI capabilities we’ve announced to date,” she said. “We will continue to invest in our cloud infrastructure, particularly AI-related spend, as we scale to the growing demand driven by customer transformation. And we expect the resulting revenue to grow over time.”
Net income rose 9% to $18.3 billion, or $2.45 per share, from $16.73 billion, or $2.22 per share, a year ago. Revenue increased 7% to $52.86 billion from $49.36 billion a year ago, according to a statement.
Microsoft CEO Satya Nadella speaks at the company’s Ignite Spotlight event in Seoul on Nov. 15, 2022.
SeongJoon Cho | Bloomberg | Getty Images
Revenue in Microsoft’s Intelligent Cloud business segment, which includes the Azure public cloud, Enterprise Services, SQL Server and Windows Server, generated $22.08 billion in revenue. That’s up 16% and higher than the $21.94 billion consensus among analysts surveyed by StreetAccount.
Revenue from Azure and other cloud services grew by 27%, compared with 31% in the prior quarter. Analysts polled by CNBC had expected on average 26.5% growth, while those consulted by StreetAccount were looking for 27.2%.
The Productivity and Business Process segment containing Dynamics, LinkedIn and Office, posted $17.52 billion in revenue, up about 11% and above the StreetAccount consensus of $17.05 billion. Microsoft said growth in revenue per user helped the company achieve 14% more revenue from commercial Office 365 productivity software subscriptions.
The Teams communication app had over 300 million monthly active users in the quarter, CEO Satya Nadella said. That’s up from 280 million in the previous quarter.
The More Personal Computing segment, featuring Bing, Windows, Surface and Xbox, delivered $13.26 billion in revenue, down 9% but more than the $12.25 billion StreetAccount consensus. Bing now has over 100 million daily active users, and revenue from gaming subscriptions approached $1 billion, Nadella said.
Sales of Windows operating-system licenses to device makers declined some 28%, with higher channel inventory levels hurting results. Research firm Gartner estimated that PC shipments declined 30%. But demand for PCs was somewhat better than management had expected, Hood said.
During the quarter Microsoft announced a new multibillion-dollar investment in OpenAI and said it would draw on the company’s artificial intelligence models for a new version of its Bing search engine and enhancements to the Microsoft 365 productivity software.
“We feel we have a good lead and we have a differentiated offering up and down the stack,” Nadella said.
Excluding the after-hours move, Microsoft shares are up 15% so far this year, while the S&P 500 index is up 6% over the same period.
Charles Liang, chief executive officer of Super Micro Computer Inc., during the Computex conference in Taipei, Taiwan, on Wednesday, June 5, 2024. The trade show runs through June 7.
Annabelle Chih | Bloomberg | Getty Images
Embattled server maker Super Micro Computer said on Monday that it’s hired BDO as its new auditor and submitted a plan to Nasdaq detailing its efforts to regain compliance with the exchange. The shares jumped 23% in extended trading.
“This is an important next step to bring our financial statements current, an effort we are pursuing with both diligence and urgency,” Super Micro CEO Charles Liang said in a statement.
Super Micro is late in filing its 2024 year-end report with the SEC, and said earlier this month that it was looking for a new accountant after its previous auditor, Ernst & Young, stepped down in October. Ernst & Young was new to the job, having just replaced Deloitte & Touche as Super Micro’s accounting firm in March 2023.
Super Micro said it told Nasdaq that it believes it will be able to file its annual report for the year ended June 30, and quarterly report for the period ended Sept. 30. The company said it will remain listed on the Nasdaq pending the exchange’s “review of the compliance plan.”
Shares of Super Micro soared more than twentyfold over a two year period from early 2022 until their peak in March of this year. But the stock has been hammered on troubling news about its compliance with Nasdaq. Once valued at about $70 billion, the company’s market cap was at $12.6 billion at the close on Monday, following a 16% rally during regular trading.
Super Micro has been one of the primary beneficiaries of the artificial intelligence boom, due to its relationship with Nvidia. Sales last fiscal year more than doubled to $15 billion.
On Monday, Super Micro announced that it was selling products featuring Nvidia’s next-generation AI chip called Blackwell. The company competes with vendors like Dell and Hewlett Packard Enterprise in packaging up Nvidia AI chips for other companies to access.
Super Micro was added to the S&P 500 in March, reflecting its rapidly growing business and then-soaring stock price. Less than two weeks after the index changes were announced, Super Micro reached its closing high of $118.81.
The troubles began within months. In August, Super Micro said it wouldn’t file its annual report with the SEC on time. Noted short seller Hindenburg Research then disclosed a short position in the company, and said in a report that it identified “fresh evidence of accounting manipulation.” The Wall Street Journal later reported that the Department of Justice was at the early stages of a probe into the company.
The month after announcing its report delay, Super Micro said it had received a notification from the Nasdaq, indicating that the delay in the filing of its annual report meant the company wasn’t in compliance with the exchange’s listing rules. Super Micro said the Nasdaq’s rules allowed the company 60 days to file its report or submit a plan to regain compliance. Based on that timeframe, the deadline was Monday.
WATCH: Super Micro is a sell due to accounting irregularities
Kelly Steckelberg attends an Evening from the Heart LA 2022 Gala hosted by the John Ritter Foundation for Aortic Health at Valley Relics Museum in Van Nuys, California, on May 5, 2022.
Araya Doheny | Getty Images
Canva, a high-valued design software startup that competes with Adobe, said Monday that it hired Kelly Steckelberg as its chief financial officer, five years after she helped take Zoom public and then guided the company through its Covid-19 pandemic surge.
Founded in 2013, Canva was valued recently at $32 billion, a drop from its peak of $40 billion in 2021.
“Kelly’s impressive track record as a strong leader and strategic thinker, combined with her proven expertise in scaling enterprise companies, make her the perfect addition to our leadership bench,” Canva said in an emailed statement.
Canva is generating about $2.5 billion in annualized revenue and boasts 220 million monthly users. The company is widely viewed as a top initial public offering candidate for venture-backed tech companies after a historically slow period for new offerings dating back to early 2022.
On Monday, ServiceTitan, which sells software for the trades, filed to list on the Nasdaq. Cerebras, a maker of artificial intelligence chips, has been on file since late September, and online lender Klarna said last week that it has confidentially filed its IPO paperwork with the U.S. Securities and Exchange Commission.
A Canva spokesperson declined to comment on the startup’s timeline for an IPO.
Steckelberg held financial positions at Cisco and was CEO of online dating company Zoosk before joining Zoom in 2017. Steckelberg is based in Austin, Texas, while Canva has its headquarters in Sydney, Australia.
Zoom went public with Steckelberg’s help in 2019. The video-chat company saw its market cap soar to upward of $160 billion in October 2020, early in the Covid-19 pandemic, as users working from home swarmed to the app. Zoom has since lost more than 85% of its value.
Steckelberg announced her departure from Zoom in August after seven years at the company. Last month, former Microsoft executive Michelle Chang replaced Steckelberg as Zoom’s CFO.
Canva’s previous finance chief Damien Singh resigned in February after the company said it was conducting an internal investigation surrounding inappropriate behavior.
ServiceTitan offices in Draper, Utah.
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ServiceTitan, a company that sells software to contractors such as plumbers and roofers, on Monday filed to go public on the Nasdaq under the ticker symbol “TTAN.”
The filing suggests that investors could be getting more interested in next-generation software companies. Just a few, including Reddit and Rubrik, debuted on public markets in the U.S. this year, and chipmaker Cerebras filed for an initial public offering. There were basically no tech initial public offerings in 2021 or 2022 as central bankers pushed up interest rates to flight inflation, making investors less willing to bet on money-losing challengers.
Based in Glendale, California, ServiceTitan offers cloud software for advertising, scheduling jobs, dispatching, producing invoices and taking payments. It had a $35.7 million net loss on $193 million in revenue in the quarter that ended on July 31, according to the filing. Revenue was up about 24% year over year, and the quarterly loss had narrowed from almost $52 million.
ServiceTitan’s revenue growth rate will stand out for people investing in cloud stocks, who have seen rates sag with few new public companies in the sector. The average growth rate for Bessemer’s Nasdaq Emerging Cloud Index, the basis for the WisdomTree Cloud Computing Fund, is 16.6%.
The company was originally founded in 2007 by Ara Mahdessian and Vahe Kuzoyan, whose fathers were both residential contractors. While most ServiceTitan customers are small and medium-sized businesses, it has started focusing more on selling products to big companies and construction customers, according to the filing.
ServiceTitan plans to keep up to 5% of shares in the IPO for eligible clients, the founders’ friends and family members and others through a directed share program.
Investors include Battery Ventures, Bessemer Venture Partners, Iconiq and TPG. Iconiq on its own controlled 24% of the compan’s Class A shares.
Competitors include Salesforce and SAP, along with specialty companies such as HouseCall Pro, Jobber and Workwave.
Goldman Sachs, Morgan Stanley, Wells Fargo and Citigroup are among the company’s IPO underwriters.
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