Microsoft earnings blow past analyst expectations

Microsoft beat analyst expectations in its latest fiscal quarter, giving the stock a big boost in after-hours trading.

Shares were around 4% higher after the company reported first-quarter earning results of $2.99 per share, significantly higher than the $2.65 per share expected by FactSet. Revenue topped expectations as well, coming in at $56.52 billion compared to an expected $54.5 billion.

The company’s closely watched Azure cloud service saw a big jump in revenue, climbing 29%, which outpaced the 26% analysts were expecting.

Microsoft, of course, is a company with many moving parts. And some divisions did better than others in the most recent quarter. Here’s a look at the big winners, as well as a couple divisions that have seen better years.

Winning divisions

Gaming

The Xbox division did not include numbers from Activision-Blizzard, as the merger of those two companies did not take place in the reported fiscal quarter. Nonetheless, revenue from Xbox content and services was up 13% compared to a year ago, indicating a surge in GamePass subscriptions. And gaming revenue on the whole was up 9%. (Sales of actual Xbox hardware declined, but we’ll get to that in a moment.)

Windows OEM

A 4% increase in revenue might not sound like a win, but it represented a return to growth for the Windows OEM division (meaning money Microsoft earned every time a PC manufacturer sold a desktop or laptop with a Microsoft operating system). Yes, it was an easy comp when you consider how much the PC market slumped a year ago, but it was a positive sign that the OEM market is starting to grow once again. (Keep in mind that in the second quarter of last year, the unit saw year-over-year declines of 39%.)

Azure (and Microsoft Cloud)

Revenue for Azure and other cloud services was up 29%. That’s a bit short of the 35% year-over-year gains the unit saw last year, but any increase from the previous quarter is a good one. And it’s especially telling that Azure saw growth when Google cloud revenue fell short of expectations.

Microsoft Cloud, meanwhile, saw its revenues jump 24%, another sign of growth in the category. (Azure is focused on corporate customers.)

AI

Microsoft doesn’t break out AI in its earnings report specifically, but it does give an update on its Dynamics 365 revenue. Dynamics 365 Copilot utilizes AI, something the company has touted heavily. That division saw revenue growth of 28% in the most recent quarter.

Losing divisions

Devices

Woof. Overall, devices saw a revenue drop of 22% in the first quarter. And Xbox hardware was down 7%. That’s rough, but not completely unexpected. Microsoft has been leaning more into expanding its games universe beyond the console system—and the Xbox One has been available for three years now and has not seen a price drop. Hardcore gamers already own one and the mainstream audience is waiting for the price to fall. As for the larger devices division, the Surface tablet continues to face stiff competition and the laptop and all-in-one devices of the same name face even more competitors.

Office commercial products

Revenue for this unit fell 17% for the quarter. Again, it’s not a big shock, though, given how Microsoft has been steering corporate customers to Microsoft 365 and other subscription-based products. (Office 365 commercial revenue was up 18%.)

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