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Cloud computing and gaming boost Microsoft (NASDAQ:MSFT) earnings results

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

Microsoft Corporation (NASDAQ: MSFT) reported the results of its fiscal first quarter (ended Sept. 30), which trounced expectations on the strength of the company's cloud services and continuing swell in gaming activity. Revenue of $37.2 billion grew 12% year over year, easily surpassing analysts' consensus estimates of $35.72 billion, while also surpassing the high end of management's forecast, which topped out at $36.05 billion. Earnings per share (EPS) of $1.82 increased 32%, eclipsing the $1.54 expected by analysts.

Management cited strong demand for Microsoft's cloud computing services, with CFO Amy Hood noting, "We continue to invest against the significant opportunity ahead of us to drive long-term growth."

Azure Cloud continued to grow like gangbusters, up 48% year over year, ticking up slightly from 47% growth in Q4. This pushed the intelligent cloud segment higher, up 20% year over year. Within the segment, commercial cloud produced revenue of $15.2 billion, up 31% year over year, achieving a run rate of more than $60 billion, while generating gross margins of 71%.

The more personal computing segment got a boost, climbing 6%. Gaming continued its outsized growth, growing 22% year over year, providing fuel for the segment. Xbox content and services increased 30%, driven higher by strong third-party titles and subscriptions to Xbox Game Pass, as well as demand from Microsoft's own titles. Surface also held up its end, with revenue that increased 37%.

The productivity and business processes segment did its part with strength across its portfolio, up 11% year over year, as Office commercial products grew 9% driven by Office 365 commercial, which jumped 21%.

Microsoft could get another boost from gaming in the current quarter, as the company is releasing the next generation Xbox console next month, just in time for the holidays. In September, Microsoft revealed that for those not able to spend $499 on a new device, the company would begin offering consoles included in a monthly subscription.

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

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Danny Vena owns shares of Microsoft. 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 and recommends the following options: long January 2021 $85 calls on Microsoft and short January 2021 $115 calls on Microsoft. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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