Microsoft (MSFT) Tops FQ4 Views and Offers Strong Guide Led by Azure, Analysts Raise Numbers and PTs

Microsoft (NASDAQ: MSFT) delivered better-than-expected FQ4 results after the market close yesterday.

Earnings per share (EPS) was reported at $2.17 per share to easily top the $1.92 per share expected by surveyed market analysts. Revenue for the quarter was reported at $46.15 billion, again higher than the $44.24 billion expected.

“We are innovating across the technology stack to help organizations drive new levels of tech intensity across their business. Our results show that when we execute well and meet customers’ needs in differentiated ways in large and growing markets, we generate growth, as we’ve seen in our commercial cloud – and in new franchises we’ve built, including gaming, security, and LinkedIn, all of which surpassed $10 billion in annual revenue over the past three years,” said Satya Nadella, chairman and chief executive officer of Microsoft.

Microsoft’s Intelligent Cloud also topped the consensus as it generated $17.38 billion in revenue, up 30% year over year, compared to the $16.33 billion expected. Azure revenues grew 51%, again higher than 45.3% projected by surveyed market analysts. In an earnings call, CFO Amy Hood said that Azure growth should remain relatively stable on a sequential basis,

On the guidance front, here is what MSFT is projecting for FQ1:

• Productivity and Business Processes revenue between $14.5 billion and $14.75 billion vs $14.07 billion expected;
• Intelligent Cloud revenue between $16.4 billion and $16.65 billion vs $15.71 billion consensus;
• More Personal Computing revenue between $12.4 billion and $12.8 billion vs $12.67 billion expected.

“As we closed out the fiscal year, our sales teams and partners delivered a strong quarter with over 20% top and bottom-line growth, highlighted by commercial bookings growth of 30% year over year. Our commercial cloud revenue grew 36% year over year to $19.5 billion,” said Hood.

Following “good” FQ4 results, Mizuho’s Gregg Moskowitz raised the price target to $325.00 per share from $310.00 per share.

“MSFT reported a good F4Q, led by very healthy Intelligent Cloud and PBP upside. In addition, Azure revenue growth of 51% (+45% CC) nicely beat the Street's +42% forecast, and Commercial bookings grew a robust 25% constant currency. F1Q top-line guidance was strong, and FY22 guidance called for impressive double-digit revenue growth coupled with normalized (ex- accounting changes) operating margin expansion. Looking ahead, we maintain our view that MSFT's growth opportunities over the medium-term and beyond are greater than many realize, and that MSFT is positioning for materially greater success in the cloud,” Moskowitz said in a note.

Strong FQ4 and “even better guide led by Azure” prompted Cowen analyst Derrick Wood to also hike the price target to $320.00 per share from $310.00.

“We think this was a strong qtr & even stronger guidance. While the lack of Azure acceleration was a slight disappointment, 1Q guide of stable growth (~45% cc) was well above our 35% est. & sets up for a good change of acceleration next qtr. We view the new explicit Azure guide positively & see this as a sign of greater confidence in consumption trends than originally expected. We also think FY22 margin expansion ex-acct change was better than feared. MSFT is on track for another year of double-digit top & bottom line growth & we think remains a core holding,” the analyst writes in a memo.

Shares of MSFT are up nearly 0.5% in pre-open Wednesday.

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