Microsoft Corporation (MSFT): Why The Stock Rose On Q1 Earnings

microsoftDavid Zeiler: Microsoft Corporation (NASDAQ:MSFT) posted a strong beat on its first-quarter earnings today (Thursday), pushing MSFT stock up in after-hours trading.

Microsoft stock rose as much as 4% following the earnings announcement after the market close.

The solid Q1 Microsoft earnings should boost confidence in Chief Executive Officer Satya Nadella’s leadership as he tries to steer Microsoft through a tough transition period.

Nadella is trying to manage the digestion of the $7 billion acquisition of Nokia’s devices division, a questionable deal made by former CEO Steve Ballmer. In July, Nadella announced 18,000 layoffs that would be spread over one year.

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The Redmond, Wash.-based tech giant beat on both earnings and revenue. Virtually all segments contributed. Earnings per share (EPS) were $0.54, besting forecasts of $0.49 per share.

That’s more impressive than it looks, as the beat came despite hefty restructuring costs. While that was lower than the $0.62 EPS from the same period a year ago, it includes $0.11 per share of restructuring charges. Backing that out, MSFT improved EPS by $0.03 year over year.

msft stock

Revenue was $23.2 billion, beating expectations for $22 billion. That’s a 24.8% increase over the $18.53 billion in the year-ago quarter.

“We delivered a strong start to the year, with continued cloud momentum and meaningful progress across our device businesses,” said Amy Hood, executive vice president and chief financial officer of Microsoft.

Why MSFT Stock Rose on Q1 Earnings

The strong Q1 MSFT earnings were powered primarily by strong growth in Microsoft’s Devices and Consumer Division. Revenue there grew 47% to $10.96 billion. That’s the sort of growth investors love to see, particularly from an older tech company like Microsoft.

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