Microsoft – Azure Is Our Favourite Colour

Published on
  • Microsoft Corporation (NASDAQ:MSFT) released its Q4 numbers just after the US market closed on Tuesday.

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Q2 2021 hedge fund letters, conferences and more

  • Once again growth was dominated by its Azure cloud computing division where revenues jumped by 51%, helping the overall business to report a growth rate of 21%.
  • Profits moved ahead by 47% compared to the same period a year ago, with growth flattered by the impact of the pandemic on the prior period.
  • Earnings per share increased by 49% to $2.17 compared to a consensus expectation of $1.92
  • Overall revenues of $26,2bn beat consensus by a margin of over 5%.

Microsoft's Q4 Earnings

Commenting on the numbers, Steve Clayton, HL Select fund manager said:

“We hold Microsoft shares as one of the biggest positions in our HL Select Global Growth Shares fund precisely because of the qualities the company has shown today. Microsoft’s long-established core products, Windows operating systems and Office software dominate their markets and look set to generate reliable cash flows for years to come. Their Azure cloud computing division is the number 2 global player and is growing like Topsy. Microsoft may be huge, but it is still growing at pace, as these figures demonstrate so clearly.

Few things are as valuable as cash generative businesses with dominant market positions in growing markets. Microsoft fits the bill perfectly, especially with a rising proportion of its revenues coming from recurring sources, like Office 365.

But expectations were high ahead of these numbers, and we suspect some investors were looking for even higher growth rates from Azure.  The wider Nasdaq market took a 1.2% pasting

In normal market hours so perhaps it’s not that surprising that the stock dipped a couple of percent further in after-hours trading.”

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