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Microsoft Beats Both Revenue and EPS Expectations

Microsoft delivers strong quarterly results as its core businesses outperform.

This is the week when the big tech giants release their previous quarter earnings figures. For Microsoft, the previous quarter corresponds to the Q3 2021 fiscal year.

The pandemic, the shift in consumer behavior, and the rise of remote working all bode well for Internet giants such as Microsoft. The results for the quarter should therefore come as no surprise, with earnings-per-share (EPS) beating expectations by $0.17 and revenue beating expectations by $858.22 million.

Microsoft’s Q3 2021 FY Earnings Highlights

Despite its huge size, Microsoft organizes its business into only three core areas: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. All three areas experienced double-digit growth when compared to the same period last year, with Intelligent Cloud once again leading the pack by growing 23% on a year-over-year (YOY) basis.

Microsoft returned $10 billion to shareholders in the form of dividends and share buybacks. This is up 1% YOY, and the split was $4.2 billion as dividends and the rest to repurchase shares.

Capital flow from operations rose by 27% when compared to the previous year, and the free cash flow was also up 24% year-over-year. LinkedIn revenue increased by 25%, with record engagement among users.

Despite delivering the strongest revenue since 2018, Microsoft’s shares fell by more than 2% in the pre-market. Maybe Investors disliked the fact that Azure — the intelligent cloud’s pearl and the cash cow — only delivered inline growth rather than beating expectations. This is pretty much the only negative we can take from Microsoft’s quarterly results.

Microsoft faces stiff competition from the likes of Google and Amazon, particularly in the cloud services space. Yet, this dividend-paying company rewards its shareholders quarterly and delivers double-digit growth with huge free cash flow and a strong customer base. As such, Microsoft’s share price should find bids on its move to the downside, in line with the solid growth posted.

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