Microsoft (MSFT) continued its long run of topping earnings and sales predictions as work from home during the pandemic sparked rampant demand for its core cloud services and gaming products.

The stock drifted lower in after-hours trading as investors fretted that the pace of growth may not live up to heady expectations in the quarter running in to Christmas.

Having closed on Tuesday at $213.25, the after-hours data suggests a rough 1.7% decline is in store to $209.70 when trading resumes later today.

EARNINGS BEAT AGAIN

Overnight, the world’s largest software company reported fiscal first-quarter earnings to 30 September of $13.9 billion, or $1.82 a share (EPS), up from $1.38 a year ago and blasting past analysts’ EPS projections of $1.54.

Revenue hit $37.2 billion, up from $33.1 billion a year ago and beyond the $35.8 billion consensus estimate.

It came as no surprise that cloud and gaming stood out for the bulls. Microsoft reported first-quarter revenue in its Intelligent Cloud unit - which includes cloud-based analytics arm Azure - of $13 billion, up from $10.85 billion a year ago and topping the average analyst estimate of $12.7 billion.

On the gaming side, or Personal Computing in which PC and Xbox revenue sit, Microsoft reported sales of $11.85 billion, up 6.5% year-on-year and beating the average analyst estimate of $11.18 billion.

WEAKER CHRISTMAS RUN-IN STEER

The main sticking point was guidance. Microsoft’s steer for the October-December second quarter underwhelmed, interestingly given that the company will launch its latest Xbox consoles.

Microsoft guided for revenue of $39.5 billion to $40.4 billion in the quarter, which would be up on the $36.9 billion in the 2019 holiday period, but marginally off the $40.5 billion analyst average estimate.

Find out how to deal online from £1.50 in a SIPP, ISA or Dealing account.

Issue Date: 28 Oct 2020