Microsoft reports another record quarter: ‘secular tailwinds will continue’

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Written on Oct 26, 2021

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Microsoft Corp's earnings top $20 billion for the first time in Q1.
Rishi Jaluria discusses Microsoft's results on CNBC's "Closing Bell".
Shares of the company are about 2.0% up in after-hours trading.

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Microsoft Corp (NASDAQ: MSFT) shares are up nearly 2.0% in after-hours trading on Tuesday after the tech giant said its earnings topped $20 billion for the first time in Q1.

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Jaluria picks MSFT as his favourite mega cap name

On CNBC’s “Closing Report”, RBC Capital Market’s Rishi Jaluria said Microsoft was his favourite mega cap name.

A strong beat across the board. The most important areas; cloud, Azure, dynamics all accelerating. It’s telling us that the software spending space is healthy and that we’re in the early days of digital transformation. So, those secular tailwinds are going to continue on from here.

Jaluria rates Microsoft at “buy” with a price target of $360 that represents a 15% upside from where the stock closed on Tuesday. He cited increasing profitability and “insulation” from supply chain constraints, Apple privacy changes, and antitrust issues for his bullish stance.

Q1 financial performance

Microsoft reported $20.5 billion in earnings that translates to $2.71 per share versus the year-ago figure of $1.82 per share. Excluding $3.3 billion worth of a nonrecurring income-tax benefit, it earned $2.27 a share, as per the earnings press release.

The American multinational generated $45.3 billion in revenue – a sharp increase from last year’s $37.15 billion. According to FactSet, experts had forecast $2.08 of per-share earnings in the first quarter on $44 billion in sales.

Microsoft executives are expected to give future guidance on the conference call scheduled for 05:30 p.m. ET.

Revenue from individual business segments

According to Microsoft, it generated $16.96 billion in sales from Intelligent Cloud, $13.3 billion from its traditional PC business, and $15.04 billion from the cloud-software division.

Sales from all segments came in significantly ahead of analysts’ estimates and last year’s numbers, despite a slowdown in PC shipments. Other notable figures include a 50% year-over-year growth in Azure versus 49% expected.

Last month, Microsoft announced a strategic investment in healthcare data centre startup Truveta.