Microsoft Shares: Here’s Why They Jumped Over 8% in After Hours

April 26, 2023

Microsoft stock

In Singapore, many of us invest in the US stock market – mainly because it’s the largest in the world and has a very consistent track record of delivering positive long-term returns.

That’s especially true of the Big Tech firms, some of which have started reporting their latest earnings numbers.

One of the world’s largest technology companies – Microsoft Corporation (NASDAQ: MSFT) – reported its latest Q2 fiscal year 2023 (FY2023) after the market closed on Tuesday (25 April).

The cloud, productivity software and gaming giant beat on its earnings expectations and its shares rose as much as 8.5% in after-hours trading.

What are the key earnings takeaways for tech investors in Singapore and what made Microsoft’s share price spike higher after its release? Let’s check it out.

Revenue and profit up strongly…

For Microsoft, its quarter was a positive surprise as the company posted revenue of US$52.9 billion for the three months ending 31 March 2023.

This was up 7% year-on-year (and an increase of 10% on an FX-neutral basis), easily beating consensus expectations for US$51 billion in sales.

Meanwhile, earnings per share (EPS) for Microsoft came in at US$2.45 versus the average consensus expectation of US$2.23.

There was a big surprise from its More Personal Computing business – which includes its Office Commercial segment – as that racked up sales of US$13.3 billion.

That was well ahead of the US$12.3 billion guidance for the quarter, which was at the top end of Microsoft’s management’s range for the period.

Management attributed this to robust growth in its commercial business, implying that a PC refresh cycle could be on the horizon.

…but the cloud and AI steal the headlines

What really caused the jump in Microsoft shares, though, was its cloud division (as always seems to be the case when the company reports).

During its Q3 FY2023, Microsoft’s Intelligent Cloud business – which includes its Azure public cloud business – saw growth of 17.1% year-on-year to US$22.1 billion.

As investors can see from the dark blue below, its Intelligent Cloud business is now a vastly profitable division from an operating income perspective.

Microsoft Q3 FY2023 cloud

Source: Microsoft Q3 FY2023 earnings slides

But talk of those two big words, artificial intelligence (AI), on the earnings call got investors excited.

Indeed, Microsoft’s management said that Bing app installations have almost quadrupled since the launch of its AI-powered Bing search engine in February.

CEO Satya Nadella backed up this optimism up by commenting that:

“We look forward to continuing this journey in what is a generational shift in the largest software category — search”.

Holding up well amid headwinds

Overall, it was another solid quarter for Microsoft amid macroeconomic headwinds and higher interest rates.

Its cloud business is still seeing strong bookings and its various business arms are performing respectably. Over the quarter, Microsoft bought back US$4.5 billion worth of shares.


Disclaimer: ProsperUs Head of Content & Investment Lead Tim Phillips owns shares of Microsoft Corporation.

Tim Phillips

Tim, based in Singapore but from Hong Kong, caught the investing bug as a teenager and is a passionate advocate of responsible long-term investing as a great way to build wealth.

He has worked in various content roles at Schroders and the Motley Fool, with a focus on Asian stocks, but believes in buying great businesses – wherever they may be. He is also a certified SGX Academy Trainer.

In his spare time, Tim enjoys running after his two young sons, playing football and practicing yoga.

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