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Microsoft earnings: Cloud and personal computing growth power earnings beat

·Technology Editor
·3 min read
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Microsoft (MSFT) reported its Q4 2021 earnings after the closing bell on Tuesday, beating analysts' expectations on the continued strength of its growing cloud empire, which saw its Azure platform revenue skyrocket by 51%.

Here are the most important numbers from the report compared to what Wall Street was expecting, as compiled by Bloomberg.

  • Revenue: $46.15 billion versus $44.25 billion expected

  • Earnings per share: $2.17 versus $1.92 expected

  • Productivity and Business Processes: $14.69 billion versus $13.9 billion expected

  • Intelligent Cloud: $17.38 billion versus $16.4 billion expected

  • More Personal Computing: $14.09 billion versus $13.8 billion expected

Microsoft's stock was down 2% on the news.

"Our results show that when we execute well and meet customers’ needs in differentiated ways in large and growing markets, we generate growth, as we’ve seen in our commercial cloud — and in new franchises we’ve built, including gaming, security, and LinkedIn, all of which surpassed $10 billion in annual revenue over the past three years,” Microsoft CEO Satya Nadella said in prepared remarks following the release of the report.

The overall Intelligent Cloud segment, which Azure falls under, was up 30% on revenue of $17.4 billion.

Microsoft's cloud business has been the key to its impressive stock performance in recent years, powering the company's market capitalization to a closing price north of $2 trillion for the first time in its history in June. And as more firms continue to focus on the cloud, Microsoft stands to benefit.

"We are seeing deal sizes continue to increase markedly as enterprise-wide digital transformation shifts are accelerating with CIOs all focused on readying their respective enterprises for a cloud driven architecture," Wedbush analyst Dan Ives wrote in a note ahead of Microsoft's earnings.

While the cloud has been a key growth driver for Microsoft in recent years, the market is far from oversaturated, even with competitors like Amazon (AMZN) and Google (GOOG, GOOGL) to contend with.

"We believe the cloud shift is just beginning to take its next stage of growth globally," Ives wrote. "We believe this disproportionately benefits the cloud stalwart out of Redmond, as [CEO Satya Nadella] & Co. are so well positioned in its core enterprise backyard to further deploy its Azure/Office 365 as the cloud backbone and artery."

But it hasn't all been good news for Microsoft in the last quarter. The company also learned that the Department of Defense is pulling the 10-year, $10 billion Joint Enterprise Defense Initiative (JEDI) contract it awarded Microsoft in 2019.

Project JEDI was designed to modernize the Pentagon’s communications and technological capabilities for the 21st century. But it was mired in controversy due to accusations that Microsoft beat out Amazon for the deal thanks to pressure from former President Donald Trump.

In a lawsuit, Amazon claimed that Trump pressured the DOD to choose Microsoft for the contract as a means to hurt Amazon CEO Jeff Bezos. Bezos owns The Washington Post, which Trump accused of writing “fake news” about him.

Now the contract will be spread out across multiple cloud vendors rather than a single company, which could benefit both Microsoft and Amazon in the long run.

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