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Microsoft tops 1Q estimates; analysts weigh in on its Azure cloud business

The tech giant’s cloud service Azure reported a 76% increase in revenue this quarter

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Microsoft surpassed analyst estimates on both earnings and revenue

Microsoft Corporation (NASDAQ:MSFT) topped analyst estimates on earnings and revenue in its fiscal first-quarter results as its Azure cloud business continues to grow.

The tech titan reported earnings of US$1.14 per share on revenue of US$29.08 billion compared with US$0.84 EPS on revenue of US$24.54 billion in the previous year’s first quarter.

READ: Logitech posts fiscal 2Q earnings beat on growth in gaming and video devices

The Washington-based company beat Wall Street estimates of US$0.96 EPS on revenue of US$27.9 billion.

Shares rose more than 5.5% to US$107.96 in Thursday morning trading.

Revenue grew 19% year-over-year, ahead of analyst estimates of 13.7% revenue growth.

Microsoft’s cloud service Azure reported a 76% increase in revenue, lower than the 89% reported in its fourth quarter.

Two analysts weigh in

Wedbush analysts Daniel Ives and Strecker Backe were encouraged by Microsoft’s cloud growth as it faces competition from Amazon.

“It is crystal clear from last night’s earnings/guidance and commentary (along with our recent cloud checks) that Redmond is still in the early innings of benefiting from a transformational secular cloud shift in this two-horse race with Amazon (AWS) as more enterprises around the world head down the cloud path,” wrote the analysts.

The analysts stated that a recent survey on cloud spending suggested a boost in spending among enterprises into 2019 on cloud deployments, creating a healthy environment for cloud companies.

Wedbush maintained an Outperform rating with a price target of $140.

Morgan Stanley analyst Keith Weiss remained bullish on Microsoft prior to its earnings, citing the company’s first-party content library.

Lackluster sales of its Xbox console in the face of stiff competition from Nintendo and Google has put some investors on the defensive, but Weiss appeared unfazed.

The growing library "well-positions Microsoft for the coming evolutions in gaming, subscription pricing and cloud streaming," wrote Weiss said in a note shared by Business Insider.

The analyst has an Overweight position with a price target of US$130.


Contact Lenore Fedow at [email protected]

Follow her on Twitter@LenoreMariee

Quick facts: Microsoft Corporation

Price: 214.5 USD

Market: NASDAQ
Market Cap: $1.63 trillion

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