Topline
Microsoft easily topped analysts’ forecasts in its first quarter of 2024, as the world’s largest company continues to impress Wall Street.
Earlier this year, Microsoft snatched the title of world’s largest company by market capitalization ... [+]
Key Facts
Microsoft’s $2.94 earnings per share topped estimates of $2.82, according to FactSet, and its $61.9 billion in sales topped projections of $60.9 billion.
Crucially, Microsoft reported $12.5 billion in operating income in its AI-heavy intelligent cloud division, well above estimates of $12.1 billion.
Shares of Microsoft rallied 5% in after hours trading.
Surprising Fact
The release comes immediately after Microsoft stock suffered one of its biggest losses of the year, as shares slid more than 2% thanks to investor disappointment in Facebook parent Meta’s results on Wednesday spurred a wider tech selloff.
Key Background
Microsoft shares remain up 8% year-to-date and a balmy 45% over the last 12 months through normal trading hours Thursday, comfortably topping the returns of the S&P and tech-heavy Nasdaq indexes. A pioneer of the digital age, Microsoft had garnered a reputation in recent years for not necessarily sitting on the cutting edge, but that narrative has been all but silenced as Microsoft emerged as the clear leader in artificial intelligence, alongside Nvidia. Microsoft enjoyed a reputation boost from its early investment in OpenAI, most famous as the maker of generative AI chatbot ChatGPT, but perhaps most crucially has translated the AI hype into actual results, with operating profits from its AI-heavy cloud computing division growing at a 48% annualized rate over the last five years. As such, investors are relatively valuing Microsoft higher than they did since the turn of the millennium’s dot-com bubble. Microsoft’s price-to-sales ratio, a metric which compares a company’s market value to its last 12-month revenues, is more than two times higher than it was a decade ago, reflecting the market’s belief that the 49-year-old company can rapidly expand its business.
Tangent
Earlier this year, Microsoft snatched the title of world’s largest company by market capitalization from Apple, and Microsoft’s $2.9 trillion market cap remains more than $300 billion higher than Apple’s, reflecting Microsoft’s clearer earnings growth trajectory. Consensus estimates expect Microsoft to bring home a larger gross profit than Apple by the firms’ respective 2028 fiscal years, a major turn from Apple’s $23 billion lead in 2023 net income.
Big Number
$27.6 billion. That’s how much Microsoft raked in last quarter in earnings before interest, taxes, depreciation and amortization (EBITDA). Microsoft is the second-most profitable American company by EBITDA, trailing only rival Apple, which brought in $43.2 billion in its most recent quarter. Microsoft’s EBITDA is about 55 times that of the median S&P 500 company, proof of the Washington-based behemoth’s sheer dominance.
