Microsoft (MSFT) stock declined in after-hours trading despite reporting strong fiscal third-quarter results, which reflect double-digit growth across revenue, operating income, and earnings as demand for cloud and AI services accelerated. Adjusted earnings per share came in at $4.27, which beat the consensus estimate of $4.06 per share. In addition, sales rose 18% to $82.9 billion and surpassed analysts’ expectations of $81.3 billion.
Cloud and AI Drive the Quarter
Microsoft Cloud remained the company’s growth engine, with revenue rising 29% to $54.5 billion. Meanwhile, Microsoft’s Productivity and Business Processes segment delivered $35 billion in revenue, up 17%. Particularly, Commercial Cloud and Consumer Cloud-related sales increased 19% and 33%, respectively.
Further, Microsoft’s Intelligent Cloud division, which includes Azure, generated $34.7 billion, up 30% year-over-year. Further, Azure and other cloud services grew 40%, continuing the platform’s reacceleration as enterprises adopt more AI‑powered workloads.
Moreover, commercial remaining performance obligations, which represent contracted revenue not yet recognized, surged 99% to $627 billion, as pictured below.
Is Microsoft a Buy or a Sell?
Turning to Wall Street, analysts have a Strong Buy consensus rating on Microsoft stock based on 33 Buys and two Holds assigned in the past three months. Further, the average MSFT price target of $565.77 per share implies 33.43% upside potential. However, it’s worth noting that estimates will likely change following today’s earnings report.
