To The Moon

After the US stock market closed yesterday, $Microsoft(MSFT)$ released its first quarterly report for the fiscal year 2024, with revenue and profit exceeding expectations in response to the data up to the end of September:

Thanks to the results beating analysts' expectations, Microsoft shares rose more than 6% in after-hours trading, but later narrowed to less than 4%. Investors may still have concerns.

Specifically, Microsoft F24Q1 revenue was $56.517 billion, up 12.8% from a year earlier, exceeding the analyst consensus of $54.54 billion, and also exceeding the revenue guidance range of $53.8-54.8 billion given by management. Revenue growth returned to double-digit growth after three quarters, which is to be congratulated:

In terms of business, all have exceeded expectations, whether it is cloud, Office or PC.

Among them, the Intelligent Cloud business revenue in the first quarter was $24.259 billion, an increase of 19.4%, exceeding analyst expectations of $23.6 billion. Productivity and Business Process revenue was $18.59 billion, up 12.9% year over year, exceeding analyst expectations of $18.29 billion.

More Personal Computing business revenue was $13.666 billion, up 2.5% from the same period last year, exceeding analyst expectations of $12.89 billion, reversing three consecutive quarters of decline:

Continuing to break down business, from the product line, in Productivity and Business Processes, Office 365 Commercial revenue grew 18%, driving Office Commercial products and cloud services revenue growth of 15%.

Office Consumer products and cloud services revenue grew 3%, and Microsoft 365 consumer users grew to 76.7 million. LinkedIn revenue up 8%; Dynamics 365 revenue grew 28%, driving Dynamics product and cloud services revenue growth of 22% :

In the Intelligent Cloud business, revenue from server products and cloud services increased 21%, and revenue from Azure and other cloud services increased 29%.

In More Personal Computing, Windows OEM revenue grew 4%. Windows Commercial products and cloud services revenue grew 8%. Xbox content and services revenue up 13%; Search and News advertising revenue rose 10%.

Microsoft's cloud business, which includes Azure and other cloud products, generated $31.8 billion in revenue in the first quarter, up 23.7% year-over-year, reversing the previous trend of downward growth:

From the perspective of product line revenue, almost all categories exceeded analyst expectations.

Among them, the revenue of cloud-related products exceeded expectations mainly due to the power of AI technology, such as Azure AI provides OpenAI and other open source models, customers can use these models to build their own AI applications while meeting specific cost delays and performance requirements. There are now more than 18,000 customers using Azure OpenAI services, up from 11,000 last quarter.

For example, Microsoft introduced Copilot into other product lines, which not only increased the unit price of Office 365 customers, but also increased user loyalty.

Non-cloud businesses, such as Windows OEM, reversed the previous five consecutive quarters of decline, mainly due to the global PC market recovery. Xbox returned to double-digit growth, mainly due to the higher-than-expected launch of new Starfield games.

AI not only led Microsoft to return to double-digit growth, but also improved profitability. Microsoft's gross margin reached 71.2% in the first quarter, a new high, an increase of 2.2% over the same period last year:

At the same time, Microsoft continued to reduce costs and improve efficiency. In the first quarter, its sales expenses increased 2.1% compared with the same period last year; Administrative expenses increased by 5.44% year-on-year.

Research and development expenses increased by 0.47% year-on-year, both significantly lower than revenue growth, and Microsoft's headcount decreased by 7% from the same period last year:

After the combination of the two, Microsoft's net profit soared to $22.29 billion in the first quarter, up 22.2% from a year earlier, significantly exceeding the 12.8% revenue growth rate, with a net interest rate of 39.4%:

For the next quarter, the overall revenue is expected to be between $60.4 billion and $61.4 billion, an increase of 14.5%-16.4% over the same period last year.

of which, it is expected that the revenue of Intelligent Cloud business is between $25.1 billion and $25.4 billion, an increase of 16.7%-18.1%; Azure is expected to grow by 26% to 27% at fixed exchange rates, the growth rate has not continued to improve in the first quarter, and the performance is flat.

Productivity and Business Processes Revenue for the second quarter is expected to be $18.8 billion to $19.1 billion, an increase of 11% to 12%.

More Personal Computing revenue is expected to be $16.5 billion to $16.9 billion, up about 18%, and the growth rate continues to increase from the first quarter.

The following figure shows the revenue forecast from Microsoft's product line:

Overall, Microsoft's first-quarter report was much better than expected, but the growth rate of its core cloud business was flat in the second quarter, bringing no more surprises to the market. In terms of valuation, Microsoft's price-to-earnings ratio is still 31.7 times, which may be the reason for yesterday's after-hours gains fell: