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Microsoft smashes earnings expectations with strong cloud performance

Microsoft (MSFT) reported its fiscal Q1 2022 earnings after the closing bell on Tuesday, easily beating analysts' expectations on the top and bottom line, with cloud revenue up 36% year-over-year. The stock was flat on the news.

Here are the most important numbers from the report compared with what analysts were expecting, as compiled by Bloomberg.

  • Revenue: $45.3 billion versus $43.93 billion expected

  • Earnings per share: $2.71 versus $2.07 expected

  • Intelligent Cloud: $16.98 versus $16.58 billion expected

  • Productivity & Business processes: $15.04 versus $14.70 billion expected

  • More personal computing: $13.31 versus $12.68 billion expected

Microsoft Chief Executive Officer (CEO) Satya Narayana Nadella speaks at a live Microsoft event in the Manhattan borough of New York City, October 26, 2016. REUTERS/Lucas Jackson
Microsoft Chief Executive Officer (CEO) Satya Narayana Nadella speaks at a live Microsoft event in the Manhattan borough of New York City, October 26, 2016. REUTERS/Lucas Jackson (Lucas Jackson / reuters)

"Digital technology is a deflationary force in an inflationary economy," Microsoft CEO Satya Nadella said in a statement. "The Microsoft Cloud delivers the end-to-end platforms and tools organizations need to navigate this time of transition and change.”

Microsoft's cloud business is the company's most important segment, helping to drive the tech giant's market cap well over $2 trillion, and it continues to grow.

Microsoft recently began rolling out its latest version of Windows, called Windows 11, but the global chip shortage, which is expected to last at least until well into 2022, is limiting new computer sales.

Still, the company managed to beat analyst expectations in the segment, and Windows OEM revenue grew 10% in the quarter.

According to research firm Gartner, while business demand for desktop PCs is strong, the chip crisis is limiting the availability of laptops. Adding to the issue, according to Gartner research director Mikako Kitagawa, is the fact that the availability of COVID-19 vaccines is causing consumers to spend on other goods outside of PCs. In other words, as people are heading back out into the world, they’re more interested in spending on things beyond computers, such as dinners out.

"Worldwide PC shipments totaled 84.1 million units in the third quarter of 2021, an increase of 1% from the third quarter of 2020, according to preliminary results by Gartner, Inc.," Kitagawa said in a press release. "As COVID-19 vaccines become more widely available, consumer and educational spending began to shift away from PCs to other priorities, slowing momentum in the market."

Microsoft's gaming segment has also been stung by the chip shortage. Demand for the company's Xbox Series X and Series S consoles has dramatically outstripped supply, leaving consumers to hunt for systems on the secondary market, where they go for hundreds over their asking prices of $499 and $299, respectively.

That segment saw revenue increase by just 2%.

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