Shares jumped in trading Tuesday after the software company’s latest-quarter profit came in slightly better than expected.
While the company saw weakness in its PC software business, Microsoft (ticker: MSFT) posted solid results in cloud computing and enterprise applications. Notably, the Azure public cloud business beat Wall Street’s growth estimates, a relief for investors jittery about the outlook for corporate IT spending.
The solid results could raise hopes that the December quarter’s tech results may not be as bad as some on Wall Street had feared. Microsoft shares were up 5% in late trading shortly after the earnings release.
For the second quarter of its fiscal year ending December 31, Microsoft posted revenue of $52.7 billion, up 2% from a year earlier. That was a bit shy of Wall Street’s consensus view of $53.1 billion, but was within the company’s guidance range of $52.4 billion to $53.4 billion. Profit on an adjusted basis was $2.32 per share, three cents better than the Wall Street consensus of $2.29 per share. Gross margin was 66.8%, down slightly from 67.2% a year ago.
Profit was $2.20 per share on a GAAP basis. The difference is tied to the company’s recently announced plans to cut its workforce by 10,000 jobs, or less than 5% of its total workforce. The company said it would take a $1.2 billion charge in the December quarter for severance costs as well as unspecified changes to the company’s hardware portfolio and office consolidation.
The company bought back shares worth $4.6 billion during the quarter.
Microsoft also said that commercial bookings in the quarter were up 7% compared to a year earlier, or 4% adjusted for currency; September quarter bookings were down 3%, but up 16% in constant currency.
Microsoft said revenue from its Intelligent Cloud segment, which includes Azure, was $21.5 billion, up 18%, or 24% in constant currency. This was toward the upper end of the company’s $21.25 billion to $21.55 billion guidance range. Azure revenue was up 31%, or 38% in constant currency.
The company said total Microsoft Cloud revenue (which includes some additional elements beyond the Intelligence Cloud segment) was $27.1 billion, up 22% or 29% adjusted for currency.
Microsoft said revenue from its Productivity and Business Processes segment was $17 billion, up 7% or 13% adjusted for currency; This was slightly above the forecast range of $16.6 billion to $16.9 billion.
The company said revenue from its greater personal computing segment was $14.2 billion, down 19%, or 16% in constant currency, amid a sharp slowdown in the personal computer market, lowering the company’s forecast range from $14.5 billion to $14.9 billion. . Windows OEM revenue was down 39%, while Xbox content and services revenue was down 12%. Revenue from devices, mostly Surface PCs, was down 39%. Search and news advertising revenue excluding traffic acquisition costs were up 10%, or 15% adjusted for currency.
Research firm International Data Corp. recently estimated that PC shipments were down 28% year-on-year in the December quarter. What began as weakness in consumer PC demand has spread to enterprise as companies reduce their IT spending amid the economic downturn.
For the March quarter, Wall Street saw total sales of $52.6 billion, including $16.9 billion in productivity and business processes, $22.3 billion for intelligent cloud and $13.6 billion for more personal computing, and profits of $2.35 per share.
The company will provide guidance for the March quarter on its call with investors on Tuesday at 5:30 p.m. Eastern.
Write to Eric J. Savitz at email@example.com