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Microsoft Beats Q3 Earnings Forecasts, But Flat Azure Revenues Cloud Sentiment

Azure revenues were flat to last quarter, Microsoft's Q3 earnings indicated, adding a cloud of doubt to its modestly better-than-expected top and bottom lines.

Updated at 4:53 pm EST

Microsoft Corp  (MSFT) -  posted modestly better-than-expected third quarter earnings Tuesday but noted flat revenue growth in its key cloud division, sending shares lower in after-hours trading.

Microsoft said revenues for Azure, its flagship cloud division, rose 46% from last year, helping overall group revenues rise 18% to a record $49.4 billion for the three months ending in December, Microsoft's fiscal third quarter. That just topped analysts' estimates of a $49.05 billion tally, but it was notable that Azure revenues only grew at the same clip in the prior quarter.

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Still, Microsoft's bottom line rose 7.7% to $16.7 billion, as adjusted earnings rose 13.8% from last year to $2.22 per share, just ahead of the Street consensus forecast of $2.19 per share.

In terms of reporting segments, Productivity and business processes division revenues rose 17% to $15.8 billion, Microsoft said, while Intelligent Cloud revenues were up 26% to $19.1 billion. More Personal Computing revenues rose 11% to $14.5 billion.

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“Going forward, digital technology will be the key input that powers the world’s economic output,” said CEO Satya Nadella. “Across the tech stack, we are expanding our opportunity and taking share as we help customers differentiate, build resilience, and do more with less.”

Microsoft shares were marked 1.2% lower in extended hours trading immediately following the earnings release to indicate a Wednesday opening bell price of $267.00 each.

“Continued customer commitment to our cloud platform and strong sales execution drove better than expected commercial bookings growth of 28% and Microsoft Cloud revenue of $23.4 billion, up 32% year over year,” said CFO Amy Hood.

Linkedin revenues were up 34%, Microsoft said, while XBox content and services revenues were up 4%, thanks if part to declining users, chip shortages and supply chain disruptions, placing even more pressure on Azure and the broader cloud division.

The Federal Trade Commission will reportedly review its planned $69 billion takeover of video game maker Activision Blizzard ATVI, amid concerns the deal will stifle competition in the $200 billion video game industry.

Microsoft will pay $95 a share for the Call of Duty and World of Warcraft gamemaker, the companies said revealed in February, in a deal that could see rivals scrambling to secure their place, as well as their scale, in the 3 billion player-strong market as companies to establish and monetize their subscriber bases ahead of their move into the metaverse.