Microsoft sales grow thanks to strength of the cloud, but its shares fall

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Microsoft Corp (NASDAQ: MSFT ) on Tuesday met analysts’ expectations for its quarterly sales and beat earnings estimates, but its shares fell as investors looked for signs of a stronger economic recovery and a performance even more impressive considering its market value has skyrocketed.

The Redmond, Washington, company has become one of the most valuable in the world, worth close to $2 trillion, amid the rise of cloud computing. Its Azure cloud service is closing in on market leader Amazon (NASDAQ: AMZN ) Web Services.

Adjusted revenue and earnings per share for the third quarter ended March 31 were $41.7 billion and $1.95 per share, above analyst estimates of $41.03 billion and $1.78 per share. according to Refinitiv data.

Microsoft shares fell 3.2% in after-hours trading.

“One-off tax and currency benefits have buoyed Microsoft’s third quarter numbers and as a result the market is not welcoming the numbers as much as might be expected,” said Nicholas Hyett, equity analyst at Hargreaves Lansdown.

Sales of what Microsoft calls its “commercial cloud,” which contains server infrastructure like Azure along with cloud-based versions of its Office software, rose 33% to $17.7 billion. Sales of Dynamics 365, which competes directly with Salesforce (NYSE: CRM ).com, grew 45% and the enterprise version Office 365 added 15% more users.

Microsoft has continued to double down on cloud-based software, saying last month it would buy artificial intelligence software firm Nuance Communications Inc for $16 billion, excluding net debt, to bolster its health care business.

The boom in work-from-home PC sales has also helped drive business for the Windows operating system.

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Microsoft said Azure grew 50% in the quarter, or 46% when adjusted for currency variations. This is down from 48%, currency-adjusted, in the previous quarter, but in line with analyst expectations for 46.3% growth, according to data from Visible Alpha.

The company added that revenue from the “intelligent cloud” business containing Azure was $15.1 billion, above analyst expectations of $14.92 billion, according to Refinitiv data.

Sales of Microsoft’s software unit, which includes Office and Teams, were $13.6 billion, compared with estimates of $13.49 billion, according to Refinitiv.

Sales from its social network LinkedIn rose 23% on a currency-adjusted basis, slightly above Visible Alpha’s estimate of 21.9%, as revenue continued to recover from a sharp decline in job postings. and hiring at the start of the pandemic.

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