Microsoft stock falls due to poor guidance, slowing Azure growth

Microsoft MSFT shares tumbled Wednesday after the software giant beat Wall Street’s fiscal first-quarter targets but guided far less than views for the current period. MSFT stock fell more than 7% on the news.




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The Washington-based Redmond company said late Tuesday that it earned $2.35 per share on sales of $50.1 billion in the quarter ended September 30. Analysts polled by FactSet had forecast Microsoft’s earnings of $2.31 per share on sales of $49.7 billion. Year-over-year, Microsoft’s profits increased 4% with sales increasing 11%.

Microsoft credited its cloud computing services with better-than-expected results. However, its Azure infrastructure business has grown at a slightly lower rate than expected.

“Microsoft Cloud revenue this quarter was $25.7 billion, up 24% (up 31% in constant currency) year-over-year,” Microsoft Cloud CFO Amy Hood said in a press release. “We continue to see strong demand across our businesses including another quarter of strong bookings as we deliver compelling customer value.”

Microsoft stock fell late

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.

In morning stock market trading today, MSFT stock fell 7.1% to 232.80. During the regular session on Tuesday, MSFT stock rose 1.4% to close at 250.66.

Among Microsoft’s three business segments, Intelligent Cloud was the best performer in the September quarter. Revenues in this segment increased 20% year-over-year to $20.3 billion. The module includes server products and cloud services such as Azure.

Microsoft’s Productivity and Business Operations unit saw sales increase 9% to $16.5 billion. The department includes Office productivity software as well as Business Dynamics and LinkedIn.

Microsoft’s Personal Computing unit was lagging, with revenue dropping just a tiny bit to $13.3 billion. The unit includes software for Windows PC, Xbox video games, Surface PCs, online search, and ads.

MSFT Stock ranks first in the group

Ahead of Microsoft’s earnings report, analysts expressed concerns that a weak PC market would hamper its results.

computer based post stock, Logitech International (LOGI), rose Tuesday after the peripheral maker matched Wall Street’s earnings target for the September quarter and maintained sales and earnings targets for fiscal year 2023. However, sales in the September quarter missed views as foreign exchange rates took a bite.

Logitech stock jumped 11% to 50.64 Tuesday.

MSFT stock ranks among the top seven stocks in IBD’s desktop software industry group, according to an IBD stock survey. But it has an average IBD compound rating of 65 out of 99.

The complex classification for IBD combines five separate proprietary classifications into one easy-to-use classification. The best growth stocks have a composite rating of 90 or better.

Follow Patrick Seitz on Twitter at Tweet embed For more stories about consumer technologies, software and semiconductor stocks.

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