Microsoft surpasses $60 billion in annual profit for the first time, capping another record-breaking year

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Microsoft ended another record-breaking year with profits of over $60 billion and sales of $165 billion, which explains why it is the second $2 trillion company in the history of the US stock market.

Microsoft MSFT, down -0.87% Tuesday, reported fourth-quarter financial earnings of $16.46 billion, or $2.17 per share, up from $1.46 per share a year ago. The manufacturer of Windows and other software products revealed revenue of $46.15 billion, a record quarterly and up from $38.03 billion in the same quarter last year.

“Our results show that when we execute well and meet customer needs in different ways in large, growing markets, we drive growth, as we’ve seen in the commerce cloud — and in the new franchises we’ve created, including games, security, LinkedIn, and LinkedIn, all of which cross $10 billion In annual revenue over the past three years, CEO Satya Nadella said in a statement.

Analysts expected average earnings of $1.92 per share on sales of $44.22 billion, according to FactSet. Microsoft shares were down 3% in after-hours trading following the release of the results, having fallen 0.9% to $286.54 in regular trading on a tough day for technology stocks.

For the full year, Microsoft grossed $61.27 billion on sales of $168.09 billion, both of which handily beat records set in the previous fiscal year. Gains beat expectations at the start of the year, as Microsoft’s offerings of cloud computing and Microsoft software found needy employer customers scrambling to transition to a work-from-home setup due to the COVID-19 pandemic and the shift to online options is expected to continue.

“It is abundantly clear that Microsoft is well positioned to continue to benefit from a number of secular trends that underpin IT spending today, including a greater focus on digital transformation and a rapid shift to the cloud,” Evercore ISI software analysts wrote earlier this month. Sector preview.

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All of Microsoft’s segments produced better growth than analysts had expected in the final three months of the company’s fiscal year, which included the launch of a new Xbox and a new version of Windows. Productivity and Business Operations, which includes most of Microsoft’s cloud software offerings, grew to $14.69 billion in sales from $11.75 billion a year earlier, topping analysts’ average forecast of $13.93 billion. More Personal Computing, the traditional PC segment, grew to $14.09 billion from $12.91 billion, topping analysts’ average forecast of $13.78 billion.

The biggest part for Microsoft has been the “smart cloud,” which includes its Azure cloud computing offering with sales of servers and other equipment needed to set up a hybrid cloud. Microsoft reported record quarterly sales of $17.38 billion in the segment, up from $13.37 billion a year ago and beating the average analyst estimate of $16.39 billion. The company said Azure sales grew 51%, easily exceeding the average analyst estimate of 44.7%; Unlike its cloud competitors Amazon.com Inc. AMZN, with -1.98% and Alphabet Inc. GOOGL, -1.59% GOOG, -2.04% Microsoft doesn’t separate raw numbers from cloud computing offerings.

Analysts expect continued growth in Microsoft’s new fiscal year, and before the report was released, they expected profits to grow to more than $63 billion and sales to rise to $186.74 billion in fiscal year 2022.

“As we move into fiscal year 22, we think Microsoft’s fundamentals are likely to be strong at any point in recent history,” Rosenblatt Securities analyst John McPeak, with a buy rating and a target price of $333 per share, wrote in a note ahead of the numbers. . “We believe Azure continues to share, demand for PCs remains strong, and Office, Teams, and Dynamics likely continue to grow in double digits.”

Read: Microsoft’s mysterious presence in antitrust campaign angers rest of the big tech companies

Microsoft didn’t share any forecasts in its release, as executives usually share their guidance on the company’s conference call, scheduled for 5:30 p.m. ET, usually a secondary catalyst for the stock in the extended session after the earnings release.

For investors who trust Microsoft will continue to grow, the question is whether the stock price will follow. Microsoft has already reached a market cap of $2 trillion this year thanks to 2021 growth of 28.6%, easily outpacing the S&P 500’s 17.7% growth, -0.47% and 14.8% increase for the Dow Jones Industrial Average DJIA, at -0.24%, which is considered Microsoft as a component.

For Evercore ISI analysts, the answer is straightforward: Just keep posting huge growth numbers, and the stock will respond.

“The easy answer to how Microsoft continues to outperform the S&P is that Microsoft continues to deliver double-digit growth at last,” wrote the analysts, who have outperform ratings and a $300 price target for Microsoft stock.

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