Microsoft Q2 FY2022 Earnings Report Highlights

Microsoft (MSFT) outperformed expectations in both earnings and revenue for Q2 FY2022.

Key Insights

• Microsoft’s gaming revenue increased by 8% year-over-year, meeting analyst predictions.
• Gaming revenue reflects sales from Microsoft’s video game hardware, software, and related services.
• The company announced a major $68.7 billion acquisition of Activision Blizzard, a leading video game developer.

Source: Analyst consensus data from Visible Alpha

In-Depth Financial Analysis of Microsoft (MSFT)

Microsoft Corporation reported Q2 FY2022 earnings that exceeded analyst estimates. Earnings per share (EPS) rose 22.2% year-over-year, outperforming forecasts. Revenue increased by 20.1% compared to the same period last year, driven primarily by strong growth in the Intelligent Cloud segment, which surged 25.5%. Meanwhile, gaming revenue aligned precisely with market expectations.

Despite the strong results, Microsoft’s stock dipped up to 5% in after-hours trading. Over the last 12 months, MSFT shares have generated a total return of 26.7%, significantly outperforming the S&P 500’s 13.0% return.

Note: Microsoft's fiscal year 2021 ended on June 30, 2021, making this report cover the company's fiscal second quarter, which corresponds to the calendar year's fourth quarter.

Gaming Revenue Performance

Gaming revenue saw an 8% year-over-year increase, marking the slowest growth since a decline reported in Q3 FY2020. This segment, part of Microsoft’s More Personal Computing division, encompasses Xbox hardware sales, Xbox content and services, Xbox Game Pass subscriptions, third-party royalties, cloud services, advertising, and more.

Microsoft’s strategic expansion in gaming is underscored by its planned acquisition of Activision Blizzard, known for blockbuster titles like Call of Duty and World of Warcraft. Valued at $68.7 billion, this deal is set to be Microsoft’s largest acquisition ever and will position the company as the third-largest gaming firm globally by revenue.

Summary of Microsoft’s Earnings Call

CEO Satya Nadella emphasized the company’s gaming growth prospects during the post-earnings conference call, stating, “With our planned acquisition of Activision Blizzard, we’re committed to enabling gamers to enjoy exceptional experiences anytime, anywhere, and on any device. We’re also shaping the future of gaming as emerging platforms like the metaverse evolve.”

Microsoft’s next earnings announcement for Q3 FY2022 is scheduled for April 28, 2022.

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