Microsoft Corporation (NASDAQ:MSFT) fell by more than 1% in after-hours of trading despite the company reporting first-quarter results that topped Wall Street estimates. The sell-off came on investors reacting to weak revenue guidance that rattled investors. Investors also pushed the stock lower after the company’s cloud unit Azure reported a 48% revenue growth down from 59% reported a year ago.
Q3 Results
The sell-off came even on the software giant reporting a solid quarter as revenue surged to $37.2 billion, well above $35.8 billion expected by analysts. Revenue in the intelligent cloud segment was up 20% to $13 billion. Azure revenue was also up 48%.
Microsoft revenue base also received a boost from a 6% increase in Personal computing revenue thanks to strong demand for the company’s Xbox units and Microsoft Surface devices. Robust revenue growth saw the company post earnings of $1.82 a share against $1.55 expected.
In response to the solid results, Chief Executive Officer, Satya Nadella, noted that the company continues to benefit from accelerated digital capabilities adoption. The company's cloud computing unit has emerged as a key driver of revenues as people resort to working from home owing to the COVID-19 pandemic. The unit should continue to grow as tech spending increases over the next 10 years.
Focus on Gaming
Microsoft director of investor relations also expects gaming to accelerate revenue growth going forward. Being one of the largest and fastest-growing entertainment forms, the segment could rise to over $200 billion in revenues by 2021.
The tech giant has continued to enhance and strengthen its prospects in the gaming industry. In the last quarter, the company acquired ZeniMax, the parent company of video game publisher Bethesda. With the acquisition, Microsoft gains access to popular titles such as Fallout Series.
With respect to the second-quarter, Microsoft expects revenues of between $39.5 billion to $40.4 billion, implying an 8% annualized growth against a consensus estimate of $40.4 billion. The company's Chief financial officer, Amy Hood, has warned that soft business demand would affect Windows licensing revenue.