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Microsoft (MSFT) Beats Q3 EPS Estimates, New CEO Impresses Wall Street

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Microsoft (MSFT) Beats Q3 EPS Estimates, New CEO Impresses Wall Street

Microsoft Corporation (NASDAQ:MSFT)’s new CEO Satya Nadella is off to a good start. The software giant reported its third quarter earnings on Thursday after the market closed. Shares soared 2.51% to $40.86 in after-hours trading as earnings eased past the Wall Street consensus despite falling PC sales.

MSFT net revenue

Microsoft Corporation (NASDAQ:MSFT) MSFT +0.17% reported third quarter revenues of $20.4 billion and earnings of $5.66 billion or 68 cents a share. The company had generated $20.49 billion in sales and $6.06 billion in profits in the same quarter last year. The decline from the previous year reflects deferred revenues that increased the year-ago figures. Analysts polled by Thomson Reuters called for 63 cents in EPS and $20.39 billion in revenues.

Microsoft Corporation (NASDAQ:MSFT) MSFT +0.17% exited the third quarter with a cash pile of $88.43 billion. The software giant bought back $1.85 billion in stock during the January-March period, up from $1.03 billion in the same period last year. The company’s revenues were hurt by weak PC sales, which fell by 4.4% during the quarter.

Microsoft Corporation (NASDAQ:MSFT) MSFT +0.17% said revenues from its Devices and Consumer business soared 12% to $8.30 billion. Windows OEM revenue was up 9%. The company added one million new Office 365 Home subscribers during the quarter, taking the total to 4.4 million subscribers. It sold 2 million Xbox consoles, including 1.2 million Xbox One units. Bing search engine increased its market share in the U.S. to 18.6%, and search advertising revenue went up 38%.

Revenues from its Commercial unit inched up 7% to $12.23 billion. Office 365 revenue more than doubled during the quarter. Azure cloud revenues soared more than 150% as the company introduced 40 new features to the platform.

Solid results aside, it was the first earnings conference call for Satya Nadella as chief executive of Microsoft Corporation (NASDAQ:MSFT), and he won rave reviews from the Wall Street analysts for his commitment and willingness to transform the software giant as it tries to catch up in the mobile era. Nadella’s predecessor Steve Ballmer rarely spoke at the quarter earnings calls.

Investors are excited about Satya Nadella’s “mobile-first, cloud-first” strategy. He is trying to take Microsoft Corporation beyond the traditional Windows business. The launch of Office for iPad last month is a step in that direction. The Microsoft Corporation CEO said that he is dealing with the harsh reality of the tech market where the software giant has ceded its dominance to Google Inc (NASDAQ:GOOG) GOOG +1.03% and Apple Inc. (NASDAQ:AAPL) AAPL +1.36%.

FBR Capital Markets analyst Daniel Ives said that Nadella has done a “Picasso-like job” creating transparency for the Redmond-based company. Ives said Nadella has created vast goodwill for Microsoft Corporation (NASDAQ:MSFT) MSFT +0.17% with Wall Street.

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