Microsoft (MSFT) Q2 2022 earnings results beat revenue and EPS expectations

Published , by Asif Khan

Microsoft is out with their Q2 2022 earnings results, and both the reported revenues of $51.7 billion and earnings-per-share of $2.48/share have come in above estimates. Microsoft's Q2 2022 EPS even beat the elevated whisper number expectations of  $2.39/share. Despite this seemingly good news, the stock dropped nearly $20/share on the news.

Despite reporting better-than-expected earnings results, Microsoft shares are sliding in after-hours trading.

Here are some highlights from Microsoft's Q2 2022 earnings release:

  • Revenue was $51.7 billion and increased 20%

  • Operating income was $22.2 billion and increased 24%

  • Net income was $18.8 billion and increased 21%

  • Diluted earnings per share was $2.48 and increased 22%

“Digital technology is the most malleable resource at the world’s disposal to overcome constraints and reimagine everyday work and life,” said Satya Nadella, chairman and chief executive officer of Microsoft. “As tech as a percentage of global GDP continues to increase, we are innovating and investing across diverse and growing markets, with a common underlying technology stack and an operating model that reinforces a common strategy, culture, and sense of purpose.”

“Solid commercial execution, represented by strong bookings growth driven by long-term Azure commitments, increased Microsoft Cloud revenue to $22.1 billion, up 32% year over year” said Amy Hood, executive vice president and chief financial officer of Microsoft.

Business Highlights

Revenue in Productivity and Business Processes was $15.9 billion and increased 19%, with the following business highlights:

  • Office Commercial products and cloud services revenue increased 14% driven by Office 365 Commercial revenue growth of 19%
  • Office Consumer products and cloud services revenue increased 15% and Microsoft 365 Consumer subscribers grew to 56.4 million
  • LinkedIn revenue increased 37% (up 36% in constant currency)
  • Dynamics products and cloud services revenue increased 29% driven by Dynamics 365 revenue growth of 45% (up 44% in constant currency)

Revenue in Intelligent Cloud was $18.3 billion and increased 26%, with the following business highlights:

  • Server products and cloud services revenue increased 29% driven by Azure and other cloud services revenue growth of 46%

Revenue in More Personal Computing was $17.5 billion and increased 15%, with the following business highlights:

  • Windows OEM revenue increased 25%
  • Windows Commercial products and cloud services revenue increased 13% (up 14% in constant currency)
  • Xbox content and services revenue increased 10%
  • Search and news advertising revenue excluding traffic acquisition costs increased 32%
  • Surface revenue increased 8%

Microsoft returned $10.9 billion to shareholders in the form of share repurchases and dividends in the second quarter of fiscal year 2022, an increase of 9% compared to the second quarter of fiscal year 2021.

These results are certainly impressive, but sentiment on Wall Street has shifted in recent week's towards large and mega cap tech companies. The company's stock (MSFT) is currently trading down on the news. Microsoft highlighted that a lot of today's beat of expectations was attributable to their Azure cloud services growth, which remains a trend over the past few years. Xbox content and services revenue only increased 10% as the company laps the launch of their new Series X and Series S consoles. No comments on Game Pass from the press release, but investors and traders should tune into the MSFT Q2 2022 earnings release conference call at 5:30 PM ET for a chance to hear more color on things like the recently-announced $68 billion acquisition of Activision Blizzard as well as any comments on the ongoing chip shortage and its effect on shipping consoles.

Microsoft's stock reversed after-hours losses on very confident Q3 2022 guidance.

In a whipsaw end to the conference call, Microsoft shares have pared their losses in after-hours trading on solid Q3 2022 guidance. The company is feeling confident that inflation won't be an issue for them and they have a smash hit on their hands with Halo Infinite. The latest adventure of John Halo has been downloaded over 20 mllion times. Tune it tomorrow to see where MSFT ends up.