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27 Jan 2021
3 min read

Microsoft Stock Lifted on Revenue Boost, Nasdaq Futures Rise

Microsoft Stock Lifted on Revenue Boost, Nasdaq Futures Rise

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Key Takeaways

  • The work-from-home model boosts Microsoft’s sales
  • Anticipation for the other tech giants’ reports

It’s earnings season and the market’s attention is on the big players reporting during one of the busiest weeks. Fueled by the pandemic in the fourth quarter of 2020, Microsoft’s revenue and earnings reached far above expectations. The tech company released its latest figures on Tuesday during after-hours trading.

For the first time, Microsoft hit $40 billion in sales for a three-month period, boosting the valuation of the stock by 4% in the after-market. The holiday period brought the company $15 billion in profit, higher than anticipated. Microsoft reported earnings of $15.46 billion, or $2.03 per share on sales of $43.1 billion, a 17% increase in revenue, while analyst expectations were set at $1.64 per share on revenue of $40.23 billion. In comparison to the previous year, the figures stood at $1.51 per share on sales of $36.9 billion.

Following the news, Microsoft stock jumped to a record close of $232.33, beating the previous all-time high from Sep 2, 2020. Year-to-date the stock is higher by 6.73% after the strong results boosted the market capitalization of the company to $1.76tn.

The strong results from the last quarter of 2020 signal that the pandemic continued to buoy tech companies as the work-from-home model became increasingly popular. Microsoft’s cloud services, PC sales, and strong demand for video gaming are reasons behind the impressive results. “What we have witnessed over the past year is the dawn of the second wave of the digital transformation sweeping every company and every industry,”, said Satya Nadella, Microsoft CEO.

Growth Anticipated for the Cloud Segment

Server products and cloud services revenue increased by 26%, underpinned by the Azure cloud platform, which posted revenue growth of 50%. Revenue in Productivity and Business Processes marked an increase of 13% to $13.4 billion. Office 365 Commercial revenue also rose by 21%. LinkedIn, which Microsoft bought in 2016, increased its revenue by 23%. Office Consumer subscribers increased to 47.5 million, growing by 28%. The More Personal Computing segment, which includes Xbox, marked an increase of 14% and reached $15.1 billion.

Microsoft expects the strong growth in its cloud division to accelerate even as the Covid-19 vaccines rollouts pick up the pace and infections in some parts of the world begin to fall. Microsoft CFO Amy Hood indicated that projects revenue from the cloud segment will continue to grow and could reach as much as 21.5% in the first quarter of this year. CFO Amy Hood is optimistic about the full fiscal year 2021 and said that Microsoft expects to return double-digit growth in both revenue and operating income.

The earnings reports continue today with Tesla, Facebook, and Apple. The three tech giants are set to report after the trading session. Apple’s results will indicate how strong the demand was for new iPhones during the holiday season. Facebook earnings will be a result of advertising amid the global pandemic, economic slowdown, and antitrust suits. Finally, Tesla’s figures will show if the sales growth and the figures can match the rise of its shares. Earlier this month, the EV maker announced that it had produced and delivered 499,550 vehicles in 2020. On Wednesday, Futures tied to the Nasdaq Composite point to a higher open, while Dow Jones futures and S&P futures are slightly negative.

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