Microsoft (MSFT) earnings Q3 2022

Microsoft CEO Satya Nadella speaks at the DLD (Digital-Life-Design) conference in Munich, Germany, on January 16, 2017.

Tobias Hase | dpa | picture alliance | Getty Images

Microsoft shares fell 2% in extended trading on Tuesday after the software maker released third-quarter financial earnings that exceeded analysts’ expectations.

This is how the company did:

  • Earnings: $ 2.22 pr. stock, adjusted, against $ 2.19 as expected by analysts, according to Refinitiv.
  • Income: $ 49.36 billion against $ 49.05 billion as expected by analysts according to Refinitiv.

Microsoft’s revenue increased 18% year-over-year in the quarter ended March 31, compared to 20% in the previous quarter, according to a statement. Sales and marketing expenses amounted to $ 5.6 billion, 10% higher than in the quarter last year and the fastest growth in more than three years.

The company’s Intelligent Cloud segment, which includes Microsoft’s Azure public cloud for application hosting, along with SQL Server, Windows Server and enterprise services, generated $ 19.05 billion in revenue. That’s a 26% increase and over $ 18.90 billion consensus among analysts polled by StreetAccount.

Revenue from Azure and other cloud services increased by 46% in the quarter compared to a growth of 46% in the previous quarter. The expectation was 45.3% according to a CNBC survey of 13 analysts, while analysts surveyed by StreetAccount had looked for a growth of 43.6%.

Microsoft’s productivity and business processes segment, which includes Office productivity software, LinkedIn and Dynamics, generated $ 15.79 billion in revenue in the quarter, an increase of about 17% and slightly more than the StreetAccount consensus estimate of $ 15.75 billion. Microsoft raised the prices of certain Office 365 productivity software subscriptions during the quarter.

The More Personal Computing segment, which includes Windows, Xbox, search advertising and Surface, had revenue of $ 14.52 billion, an increase of 11% and higher than the StreetAccount consensus of $ 14.27 billion.

Microsoft said revenue from sales of Windows licenses to PC makers rose 11% in the quarter. Microsoft had forecast high single-digit growth in January. Analyst firm Gartner estimates that PC shipments fell 6.8% in the quarter, the sharpest decline since the first quarter of 2020 following a pandemic-driven market expansion. Excluding PCs running Google’s Chrome OS operating system, which became more popular under Covid, shipping increased by 3.9%.

Revenue from security products and services falls within each of Microsoft’s three segments. In January, Microsoft said its security revenue grew nearly 45% in 2021, faster than any other major product category. The company revealed financial figures from its security business for the first time last year, which surprised some observers.

During the quarter, Microsoft announced a plan to acquire video game publisher Activision Blizzard for $ 68.7 billion, the largest transaction in Microsoft’s 47-year history. Microsoft also completed its Nuance Communications acquisition and laid out a strategy for expansion in healthcare, an industry that Nuance focuses on. Nuance took a penny from Microsoft’s quarterly earnings, but added $ 111 million in revenue.

Excluding the after-hours movement, Microsoft shares have fallen 19% since the start of 2022, which is worse than the S&P 500 index, which has fallen around 12% over the same period.

Leaders will discuss the results with analysts and issue guidance at a conference call starting at 6 p.m. 17.30 ET.

This is breaking news. Please come back for updates.

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