Microsoft share price rises as Q1 results beat forecasts

on Oct 24, 2014
Updated: Oct 21, 2019
Listen, Friday, October 24: Microsoft Corp (NASDAQ:MSFT), the world’s largest software company, yesterday reported higher-than-expected first-quarter revenue, driven by continuing growth at its cloud services business and stronger sales of mobile phones and tablets.

The company also beat analyst expectations for earnings, even though its bottom line was negatively impacted by a $1.1-billion charge related to a round of mass layoffs announced this summer.
The results provided big support for CEO Satya Nadella’s new “mobile first, cloud first” vision for Microsoft, showing that the company’s push in these areas was paying off. In addition, the Redmond-based software giant saw a solid performance at its core Windows business, which gave investors even more reasons to cheer.

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In yesterday’s after-hours trading, Microsoft’s shares rose 3.1 percent to $46.45 following the release of the report. The company’s stock had closed 1.4 percent higher at $45.02 in New York, extending its year-to-date gains to 20.3 percent.
**Strong start**
“We delivered a strong start to the year, with continued cloud momentum and meaningful progress across our device businesses,” Microsoft’s chief financial officer Amy Hood commented on the results. “We will continue to invest in high-growth opportunities and drive efficiencies across the organisation to deliver long-term shareholder value.”

Microsoft’s first-quarter revenue increased 25 percent year-on-year to $23.2 billion, well above the market consensus of $22 billion. The company’s sales benefitted from the acquisition of Nokia’s handset business, which generated revenue of $2.6 billion in its first full quarter since the close of the deal, after selling 9.3 million Lumia smartphones in the period. The unit’s revenue beat analysts’ forecasts by some $500 million.

Another bright point was the performance of Microsoft’s tablet business. Bolstered by the recent release of the Surface Pro 3 model, the tablet line generated revenue of $908 million, up from $400 million a year earlier.
The star performer, however, was the cloud business, which continued to grow rapidly during the first quarter. Microsoft said that commercial cloud sales, which comprise primarily Office 365, Azure and Dynamics CRM, had jumped 128 percent year-on-year. At the same time, subscriptions for the company’s Office 365 consumer version totalled more than seven million, representing more than 25 percent sequential growth over the previous quarter.

According to Nomura analyst Rick Sherlund, Microsoft is on track to hit $6 billion a year in cloud revenue soon, which would make the company the industry’s largest cloud vendor by his calculations.
Microsoft’s earnings per share fell 13 percent to $0.54 in the first quarter, mainly due to a $0.11 per share negative impact related to both the company’s restructuring plans announced in July and the ongoing integration of the Nokia Devices and Services unit. The result was still comfortably above the market consensus of $0.49 EPS.
**Analysts on Microsoft**
According to the Financial Times, 29 analysts offering 12 month price targets for Microsoft have a median target of $50.00, with a high estimate of $56.00 and a low of $34.00. As of October 17, 2014, the consensus forecast amongst 51 polled investment analysts covering Microsoft has it that the company will outperform the market. The same consensus estimate has been maintained since the sentiment of investment analysts improved on September 15, 2014, the FT notes.
**As of yesterday’s US close buy Microsoft shares at $45.02.**
**As of yesterday’s US close sell Microsoft shares at $45.02.**


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