High-tech giant and Dow Industrials component Microsoft (MSFT – Free Microsoft Stock Report) reported revenue and earnings for its fiscal fourth quarter (ended June 30th) of $33.7 billion and $1.37 a share (excluding a favorable tax item), respectively. The financial results compared quite favorably with our respective estimates of $32.5 billion and $1.19 a share, suggesting the company is continuing to have success providing the infrastructure, products, and services in support of its customers' adoption of cloud architecture. Investors greeted the report warmly, with MSFT shares, which have risen nicely since the beginning of calendar 2019, finding additional support.
As has been increasingly the case in recent quarters, the company's latest financial results were underpinned by its ongoing success in the cloud arena. On point, the cloud once again played an important part in each of its three business segments, with Office 365 (Commercial and Consumer) driving results in Productivity and Business Processes, strong growth in Azure continuing to propel Intelligent Cloud, and Windows Commercial products and cloud services contributing nicely to More Personal Computing.
Meanwhile, an examination of Microsoft's trended performance metrics show that its business is quite healthy, with bookings advancing rapidly in the commercial market. As a result, revenues are increasing at a high rate in the commercial space (up 39% in the June period) and the gross margin for commercial cloud is widening (to 65%).
What about Microsoft stock? The company's recent comments on the prospects for its business and its strategy for meeting its customers' demand suggest that fiscal 2020 should be another year of growth in revenue, earnings, and cash flow. MSFT will likely also provide a meaningful cash return to shareholders. This view is underpinned by the company's financial forecast for the September quarter and the broad guidance offered for the year ahead. That said, it is no secret that MSFT shares have been on a long upward trend, and those considering making a new commitment will have to be willing to pay a premium for the position. If high-quality MSFT shares already have a place in a portfolio, though, we would maintain the position.
About The Company:Microsoft Corp. is the largest independent maker of software. It develops and sells products for a wide range of computing devices. The company also sells the Xbox video game console and offers cloud services.
– Charles Clark
