Microsoft

  • Microsoft posted another set of amazing results for the first fiscal quarter of 2022. It marked 17 straight quarters where Microsoft has delivered double-digit year-over-year revenue growth. Total company revenue jumped almost 22% year-over-year to $45.32 billion in Q1 2022, growing at the fastest rate since 2018.

  • Microsoft Cloud was the top performer growing 36% year-over-year and bringing in $20.7 billion in revenue. The report showed the Cloud computing service, Azure, as well as Microsoft’s other cloud services had grown revenues 50% year-over-year for the last 5 quarters. Microsoft does not disclose Azure revenue in dollars. 

  • Search and news advertising bounced back from a low base last year growing revenues by 40% as general economic prospects improved. Server products and cloud services, and Dynamic products and cloud services were also notable standout product categories, growing revenues 35% and 31% year-over-year respectively. Office 365 continued to do well with Commercial revenue growing 23% year-over-year, and Office 365 Consumer revenue up 10% year-over-year. Meanwhile professional services social media site LinkedIn had revenue jump 40% driven by Marketing Solutions growth of 61%. Microsoft saw non-GAAP net income improve 24% to $17.2 billion for the recent quarter, with diluted EPS growing 25% to $2.27.

  • In terms of guidance, Microsoft forecast $50.15 billion to $51.05 billion in fiscal second-quarter revenue, which was ahead of the consensus expectations among analysts. The company also expects healthy broad-based growth in the Azure business consistent with recent trends and should continue to benefit from momentum in its Microsoft 365 suite. However, it does anticipate a moderation of growth rates in 365 given the size of that product’s base.

  • Microsoft is the best of breed in the technology space. Its products are ingrained into how businesses and people operate and communicate. Microsoft's success has also been bolstered by lockdown rules which resulted in a shift to remote working solutions. Going forward, Microsoft CEO Satya Nadella summed it up nicely when he said “Digital technology is a deflationary force in an inflationary economy. Businesses – small and large – can improve productivity and the affordability of their products and services by building tech intensity.”. The share is trading on a price to earnings multiple of 36x which is fair given its incredible quality and accelerating revenue and earnings growth. It is also sitting on a cash pile of over $130 billion and has maintained strong free cash flow. We are owners of Microsoft in the Cratos BCI Worldwide Equity fund as well as in managed portfolios.

Microsoft