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Microsoft crushes Wall Street estimates on earnings, stock goes nowhere

Satya NadellaMicrosoft CEO Satya NadellaREUTERS:Shannon Stapleton

Microsoft reported earnings after the bell on Thursday. After an initial dip, shares in the tech titan were up about half a percentage point in after-hours trading following the release of the report.

Here’s what Microsoft reported:

  • Earnings per share (EPS) of $1.14 vs. $1.08 expected (GAAP)
  • Revenues of $30.1 billion vs. $29.2 billion expected

Notably, this marks the end of Microsoft’s 2018 fiscal year, with the company reporting $110 billion in revenue over the last 12 months, marking the first time the company has passed the $100 billion mark. 

For the quarter, Microsoft showed strong growth in all three of its major reporting areas — especially in cloud computing, where Wall Street most wants to see growth.

Productivity and Business Processes, the unit that includes Microsoft Office, was up 13% from the year-ago period to $9.7 billion. Intelligent Cloud, which encompasses the Microsoft Azure cloud computing platform and related technologies, was up 23% from the same period of last year to $9.6 billion. And More Personal Computing, which includes Windows, the Xbox, and the Surface hardware business, was up 17% to $10.8 billion. 

Notably, the Microsoft Azure cloud — considered the leading rival to the dominant Amazon Web Services — saw revenue growth of 89% from the same period of 2017, though Microsoft doesn’t disclose specific financials for the service. Overall, Microsoft says that its commercial cloud revenue, which includes cloud business software and services like Microsoft Azure and Office 365, is up 53% year-over-year to $6.9 billion.

The Windows business was up 7% over the same period of 2017, drawn by a stronger demand for PCs pre-installed with the professional versions of Windows 10. 

Other standouts include revenue from LinkedIn, up 37% from the same time last year, and gaming revenue up 39%, with Xbox software and services up 36% on its own. The Surface business is up 25% from this time last year, which Microsoft credits to both a strong hardware lineup this year, but also that last year’s performance set the bar lower. 

Also of note is that Microsoft says that its GAAP results reflect a net benefit of $104 million related to the Tax Cuts and Jobs Act, as well as a $306 million charge related to restructuring.

Get the latest Microsoft stock price here.