Microsoft reported better-than-expected earnings and revenue for the fiscal second quarter.
The stock initially dropped in extended trading but turned positive after the company issued a sales forecast that also exceeded estimates.
Here’s how the company did:
- Earnings: $2.48 per share, adjusted, vs. $2.31 per share as expected by analysts, according to Refinitiv.
- Revenue: $51.73 billion, vs. $50.88 billion as expected by analysts, according to Refinitiv.
Revenue increased by 20% from a year earlier, according to a statement, compared with almost 22% growth in the previous quarter.
Microsoft’s net income swelled by 21% to $18.77 billion.
The company had $36.77 billion in unearned revenue at the end of the year, below the StreetAccount consensus of $36.90 billion.
Microsoft said it expects to recognize 45% of its $152 billion in remaining performance obligations over the next year; the first time that percentage has slipped below 50% since at least 2017.
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Amy Hood, Microsoft’s finance chief, eased investor concerns on the earnings call; indicating that demand remains strong across much of the business.
Hood said the company expects revenue of $48.5 billion to 49.3 billion in the fiscal third quarter; topping the $48.23 billion Refinitiv consensus.
Hood said the company now expects full-year operating margins to widen slightly.
As of the close on Tuesday; the stock is down 14% since the start of 2022, and is on pace for its worst month since 2010.
The slump has come alongside a broad selloff in technology stocks as investors brace for rising interest rates.
“We’d be buyers here,” said Christopher Ouimet, a portfolio manager at Logan Capital Management; which owns about $60 million in Microsoft stock. “We think there’s a lot of noise in the marketplace right now. Most of the high-growth stocks are getting washed out here.”
Ouimet said the rise in the yield for the 10-year Treasury note has little to do with whether Microsoft is “going to be able to sell Azure contracts.”
