The fourth-quarter earnings season is just getting started and already it’s wreaked its usual havoc on the market — some stocks are significantly higher, while others are significantly lower. And of course, there are the few that report their numbers without even a sideways glance from the market.
As of late, it’s been a gamble as to whether the market will react reasonably to the quarterly numbers. Some companies are unfairly punished for a slight earnings miss or an unexpected comment from management on the conference call, while others soar on results that are in line with expectations.
In this time of heightened volatility, one stock that may actually be trading just as it should is Microsoft Corp (MSFT), which reported fiscal second-quarter results after the bell Thursday.
MSFT stock wafted up nearly 6% after reporting beats on both the top and bottom lines, even though the results felt a bit of pressure from the shrinking PC market.
Microsoft has a history of making big post-earnings moves, both to the upside and the downside. Last night’s report marked the company’s sixth straight quarter of earnings per-share beats, combine that with impressive cloud and enterprise growth and it’s no surprise Microsoft stock has moved higher.
Net income fell 15% year-over-year to $5 billion, which translates into net income of 62 cents a share. Once adjusted, the final per-share tally of 78 cents is up nicely from the 70 cents earned last year and 7 cents ahead of expectations. Adjusted revenue of $25.69 billion also fell slightly over the year, but still came in better than estimates of $25.26 billion. On a GAAP basis, sales fell 10% to $23.8 billion.
But it was Microsoft’s cloud business that proved the most spectacular growth. Commercial annualized revenue increased from $8.2 billion in the fiscal first quarter to $9.4 billion, and the company is aiming to increase that run rate to $20 billion by fiscal 2018.
Despite the slowdown in demand for PCs, MSFT’s business remains strong, with the number of devices using Windows 10 increasing to 200 million from 110 million last quarter.
Like the rest of the Nasdaq, Microsoft got off to a rough start in 2016. MSFT stock was down 6% prior to the report (the index was down 10%), but Friday’s momentum may have given Microsoft stock what it needs to get back on its feet.
While the losses haven’t been completely recouped just yet, MSFT is close, and it looks to be only a matter of time before CEO Satya Nadella brings the stock back in the black for the year.
