Shares of Microsoft Corp. (NASDAQ: MSFT) rallied after the close on Thursday after the software giant reported better than expected fiscal fourth-quarter results.

 

Q4 2019 Summary

  • Earnings: $1.37 per share (excl. certain items)
  • Revenue: $33.72 billion
  • Azure Revenue: $11.39 billion

Microsoft closed out fiscal 2019 on solid footing with profits and revenues far outpacing estimates. The Redmond, Washington-based company reported earnings of $1.37 per share, excluding certain items, on revenues of $33.72 billion. Analysts in a median estimate polled by Refinitiv had called for an EPS of $1.21 on revenue of $32.77 billion.

Azure still lags behind Amazon Web Services in terms of cloud market share, but is far outpacing its rival in terms of growth.

Not surprisingly, Microsoft’s intelligent cloud business segment generated roughly a third of company-wide revenue. The segment, which includes the market-leading Azure public cloud, brought in $11.39 billion. Analysts in a FactSet poll called for $11.02 billion.

Azure still lags behind Amazon Web Services in terms of cloud market share, but is far outpacing its rival in terms of growth. When it comes to worldwide cloud infrastructure spending, Microsoft Azure saw annual growth of 75.9% in 2018, according to Canalys. By comparison, Amazon Web Services registered 46.3% growth. Google Cloud was the only vendor to outperform Azure but it has a much smaller market share.

As of Q4 2018, Azure’s share of the cloud market was 16.5%.

Azure revenues are up 64% year-over-year, the smallest growth rate in four years, according to CNBC.

The company’s personal computing business segment, which includes Windows and Xbox, generated $11.28 billion in revenue. The productivity and business unit brought in $11.05 billion. Both figures were much higher than expected.

 

MSFT Rises After Hours

Shares of Microsoft climbed 1.5% after-hours and were last seen trading above $138. The stock closed at $136.42 in regular trading, having gained 0.1%. MSFT is currently trading near record highs and has a total market capitalization of $1.045 trillion.

Microsoft Share Price YTD - Jul 19 2019

Source: Yahoo Finance

The stock is up 34% this year, vastly outperforming the Dow Jones Industrial Average and S&P 500 Index. Even the S&P’s high-flying information technology sector has lagged Microsoft this year.

With Azure’s cloud market share expected to hit 25% by 2025, there’s strong reason to believe that MSFT will continue to hit new milestones. Analysts at Cowen recently gave the stock an outperform rating and a $150 price target. That represents a gain of 10% from Thursday’s closing price.

 

Conclusion

As America’s only trillion-dollar company, Microsoft has defied all odds under Satya Nadella’s guidance. The CEO has overseen the software giant’s smooth transition to cloud services, with Azure emerging as a stalwart for growth. As a result, Microsoft continues to outpace the overall market by a wide margin.

Disclaimer: Author holds no investment position in Microsoft at the time of writing.