Microsoft (MSFT) is trading higher this morning after reporting Q3 (Mar) results last night. In fact, you may not have noticed, but this stock has been making a huge move in recent months. It has traveled from $95 in late December to around $130 today, an all-time high that took the stock's market cap across the $1 trillion threshold. That's a big move for this stock in such a short period of time.
The software giant reported EPS of $1.14, up 20% yr/yr while revenue grew 14.0% yr/yr to $30.57 bln. Both results were above market expectations. On the call, MSFT guided to Q4 (Jun) revenue of $32.2-32.9 bln, which was in-line with expectations.
MSFT said that demand for its cloud offerings drove commercial cloud revenue to $9.6 bln, up 41% yr/yr. Revenue in Intelligent Cloud increased by 22% to $9.7 bln; Productivity and Business Processes (PBP) revenue rose 14% to $10.2 bln; More Personal Computing rose 8% yr/yr to $10.7 bln. MSFT said that most of its geographic markets performed in-line with expectations; Japan's performance, though, was singled out for having been much stronger than expected.
Strength in the Intelligent Cloud segment was driven by customer demand for hybrid offerings. Being a leader in cloud has been a priority for MSFT for years, and a key part of its progress toward that goal involves investments in the Azure platform. MSFT notes that Azure is "the only true hybrid hyperscale cloud that extends to the edge." Emphasizing how the platform supports the differentiated needs of cloud customers, MSFT points out that with its new Azure Stack HCI, customers "can build and run virtualized applications on-premise in a consistent way." Overall, commercial cloud segment revenue in the quarter was "highlighted by healthy growth in the US, Western Europe, the UK, and Germany."
Turning to its PBP segment, revenue came in ahead of internal expectations, drawing on strong performances in Japan and by LinkedIn. Office commercial revenue grew 12% while Office 365 commercial revenue grew 30%, "driven by installed base expansion across all workloads and customer segments as well as ARPU growth." The Office 365 line benefited from a "strong performance" from its Microsoft 365 academic offers, and Office consumer revenue growth of 8% for the quarter ultimately outpaced the company's expectations. LinkedIn revenue increased 27%.
Finally, MSFT's More Personal Computing segment was driven by a better-than-expected performance in Windows. However, that was partially offset by lower than expected gaming revenue. In Windows, "the overall PC market was stronger than anticipated, driven by improved chip supply" and "better-than-expected" commercial demand. Gaming was hurt by weak monetization across third-party titles and console sales. Surface revenue grew 21% "driven by continued strength across consumer and commercial segments, particularly in Japan."
Overall, this was a very good quarter for MSFT. Probably the biggest highlights were provided by its Cloud and Office offerings. Investors closely watch Azure's performance, and that was quite strong in MarQ. As you can see, Microsoft has a lot of moving parts. It has come a long way from the era when it was focused just on its Windows platform. It now has a very diverse offering, covering a lot of areas. In particular, MSFT has been aggressive in terms of attacking the cloud market. As we mentioned earlier, the stock has really been taking off in recent months as investors are impressed with what MSFT has become.