Microsoft beats Wall Street's expectations with strong Q3 earnings

The tech giant reported another strong quarter, but shares dropped 3% after hours.

| More on:
microsoft logo and text in background with a man giving a speech

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Microsoft (NASDAQ: MSFT) announced third quarter earnings for fiscal 2021 after the market closed on Tuesday, beating Wall Street's expectations on both the top and bottom lines. The company's revenue hit $41.7 billion, up 19% over the prior year and above the 17% growth posted last quarter. Similarly, diluted earnings per share came in at $2.03, up an impressive 45%.

Hitting the highlights, revenue from Microsoft's Productivity and Businesses Processes segment grew 15% to $13.6 billion. This was the result of strong sales in commercial software products like Office 365 and Dynamics 365, which jumped 22% and 45%, respectively.

During the earnings call, CEO Satya Nadella also mentioned that Microsoft Teams reached 145 million daily active users, nearly double the 75 million daily active users reported last year. This indicates continued demand for videoconferencing and collaboration solutions that support remote work.

Sales in Microsoft's Intelligent Cloud segment surged 26% to $15.1 billion, driven in large part by 50% revenue growth in Microsoft Azure, the company's cloud computing business. While that's an impressive figure, it marks a deceleration compared to the 59% growth in the same quarter last year.

Finally, Microsoft's More Personal Computing revenue hit $13 billion, up 19%. Xbox was the main growth driver in this segment. Gaming sales surged 50%, benefiting from continued momentum following the launch of the Xbox Series X and S last November.

Despite these strong results, Wall Street wasn't impressed and shares dropped 3% after hours. This is likely a reaction to slowing growth in Microsoft Azure, which represents a significant portion of the company's long-term potential. Even so, Microsoft stock is up 14% year-to-date and 45% over the trailing 12 months.

Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool's board of directors. Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Microsoft. The Motley Fool has a disclosure policy.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Trevor Jennewine has no position in any of the stocks mentioned. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Microsoft. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on International Stock News

US economy and sharemarket with piggy bank
International Stock News

What on earth is going on with the US stock market?

Let's dive in and see.

Read more »

A graphic illustration with the words NASDAQ atop a US city and currency
International Stock News

Why Big Tech became a huge wreck across the Nasdaq last night

Jerome Powell and his compadres shocked the market with an unexpected outlook.

Read more »

a man sits at a bar leaning sadly on his basketball wearing a US flag sticker on his cheekbone near a half drunk beer and looking despondent as though his basketball team has just lost a game.
International Stock News

The Dow Jones is on its longest losing streak in 46 years. What's going on?

The Dow is on a losing streak in the middle of a boom.

Read more »

A person leans over to whisper a secret to a colleague during a meeting.
International Stock News

Despite recent news, analysts still say Nvidia stock is a buy. Here's why

Last month, Nvidia was the most valuable company in the world.

Read more »

A young girl looks up and balances a pencil on her nose, while thinking about a decision she has to make.
International Stock News

After gaining 2,100%, is Nvidia stock done?

Nvidia has taken off as one of the key players in chips and services for artificial intelligence.

Read more »

A young couple in the back of a convertible car each raise a single arm in the air whilst enjoying a drive along the road.
International Stock News

Why Tesla stock just jumped again

Wedbush's Dan Ives thinks the stock will keep moving higher thanks to Tesla's self-driving technology.

Read more »

An older couple hold hands as they bounce happily high in the air.
International Stock News

Why the Alphabet share price just leapt higher

Investors seem to hope the Trump administration will be friendly to Alphabet and its big-tech peers.

Read more »

A panel of four judges hold up cards all showing the perfect score of ten out of ten
International Stock News

Top Wall Street analyst calls Tesla stock a top pick. Is it a buy now?

Tesla shares have been on fire lately, rising more than 70% since the November 5 election.

Read more »