Microsoft shares tumbled Wednesday after the software giant edged above Wall Street's targets for its fiscal first quarter but guided much lower than views for the current period. MSFT stock fell more than 7% on the news.
The Redmond, Wash.-based company late Tuesday said it earned $2.35 a share on sales of $50.1 billion in the quarter ended Sept. 30. Analysts polled by FactSet expected Microsoft earnings of $2.31 a share on sales of $49.7 billion. On a year-over-year basis, Microsoft earnings rose 4% as sales increased 11%.
Microsoft credited its cloud-computing services for the better-than-expected results. However, its Azure infrastructure business grew at a slightly lower-than-expected rate.
"This quarter Microsoft Cloud revenue was $25.7 billion, up 24% (up 31% in constant currency) year over year," Chief Financial Officer Amy Hood said in a news release. "We continue to see healthy demand across our commercial businesses including another quarter of solid bookings as we deliver compelling value for customers."
Microsoft Stock Drops
For the current quarter, Microsoft expects sales of $52.35 billion to $53.35 billion. The midpoint of $52.85 billion was well below Wall Street's target of $56.2 billion for the December quarter.
At least 18 Wall Street analysts cut their price targets on MSFT stock after the report.
On the stock market today, MSFT stock dropped 7.7% to close at 231.32. During the regular session Tuesday, MSFT stock rose 1.4% to 250.66.
Of Microsoft's three business segments, Intelligent Cloud was the top performer in the September quarter. Revenue in the segment increased 20% year over year to $20.3 billion. The unit includes server products and cloud services such as Azure.
Microsoft's Productivity and Business Processes unit saw sales rise 9% to $16.5 billion. The division includes Office productivity software as well as the Dynamics and LinkedIn businesses.
Microsoft's More Personal Computing unit was a laggard, with revenue declining a fraction to $13.3 billion. The unit includes Windows PC software, Xbox video games, Surface computers, internet search and advertising.
MSFT Stock Ranks First In Group
Ahead of Microsoft's earnings report, analysts had expressed concerns that the weakening personal computer market would hinder its results.
Another PC-centric stock, Logitech International, rose Tuesday after the peripherals maker matched Wall Street's earnings target for the September quarter and maintained its sales and earnings goals for its fiscal 2023. However, sales in the September quarter missed views as foreign exchange rates took a bite.
Logitech stock jumped 11% to 50.64 on Tuesday.
MSFT stock ranks first out of seven stocks in IBD's Computer Software-Desktop industry group, according to IBD Stock Checkup. But it has a mediocre IBD Composite Rating of 65 out of 99.
IBD's Composite Rating combines five separate proprietary ratings into one easy-to-use rating. The best growth stocks have a Composite Rating of 90 or better.
Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.
