shares jumped in late trading Tuesday after the software company’s latest-quarterly profits came in slightly better than expected.
While the company saw weakness in its PC software business, Microsoft (ticker: MSFT) posted solid results in cloud computing and enterprise applications. In particular, the Azure public cloud business beat Wall Street growth estimates, which is a relief to investors nervous about the outlook for corporate IT spending.
The solid results could buoy hopes that December quarter tech results might not be as bad as some on Wall Street had feared. Microsoft shares were up 5% in late trading shortly after the earnings release.
For its fiscal second quarter ended Dec. 31, Microsoft posted revenue of $52.7 billion, up 2% from a year ago. That was a little shy of the Wall Street consensus view of $53.1 billion, but within the company’s guidance range of $52.4 billion to $53.4 billion. Profits on an adjusted basis were $2.32 a share, three cents better than the Wall Street consensus of $2.29 a share. Gross margin was 66.8%, down a bit from 67.2% a year earlier.
Profits on GAAP basis were $2.20 a share. The difference is tied to the company’s recent announcement of plans to reduce its workforce by 10,000 jobs, or a little under 5% of the total workforce. The company had said it would take $1.2 billion in charges in the December quarter for severance costs, as well as unspecified changes to the company’s hardware portfolio and office consolidation.
The company bought back $4.6 billion worth of stock in the quarter.
Microsoft also said commercial bookings in the quarter were up 7% from a year ago, or 4% adjusted for currency; September quarter bookings were down 3%, but up 16% in constant currency.
Microsoft said revenue from its Intelligent Cloud segment, which includes Azure, was $21.5 billion, up 18%, or 24% in constant currency. That was toward the upper end of the company’s guidance range of $21.25 billion to $21.55 billion. Azure revenue was up 31%, or 38% in constant currency.
The company said total Microsoft Cloud revenue (which included some additional elements beyond the Intelligence Cloud segment) was $27.1 billion, up 22%, or 29% adjusted for currency.
Microsoft said revenue from its Productivity and Business Processes segment was $17 billion, up 7%, or 13% adjusted for currency; that was a little above the forecast range of $16.6 billion to $16.9 billion.
The company said revenue from its More Personal Computing segment was $14.2 billion, down 19%, or 16% in constant currency, falling shy of the company’s forecast range of $14.5 billion to $14.9 billion, amid a sharp slowdown in the personal computer market. Windows OEM revenue was down 39%, while Xbox content and services revenue was off 12%. Devices revenue, mostly Surface PCs, was down 39%. Search and news advertising revenue excluding traffic acquisition costs were up 10%, or 15% adjusted for currency.
Research firm International Data Corp. recently estimated that PC shipments were down 28% year over year in the December quarter. What started as weakness in consumer PC demand has spread to the enterprise as companies trim their IT spending amid an economic slowdown.
For the March quarter, Wall Street sees total sales of $52.6 billion, including $16.9 billion in Productivity and Business Processes, $22.3 billion for Intelligent cloud and $13.6 billion for More Personal Computing, and profits of $2.35 a share.
The company will provide guidance for the March quarter on its call with investors on Tuesday at 5:30 p.m. Eastern.
Write to Eric J. Savitz at