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Microsoft Earnings: Mark Your Calendar

By Daniel Sparks - Apr 11, 2019 at 3:01PM

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Investors will be hoping Microsoft's commercial cloud revenue can keep up its impressive growth.

Software giant Microsoft (MSFT -3.63%) just put a date to its fiscal third-quarter earnings report; the company will release results for the period on April 24.

Given the stock's 18% year-to-date rise, investors will undoubtedly be watching the update closely. The company has been seeing strong top- and bottom-line growth recently, helped by impressive momentum in its commercial cloud revenue -- a revenue category composed of three of the company's most powerful catalysts. Can Microsoft keep up its strong growth?

Ahead of Microsoft's earnings release later this month, here's a preview of some key areas for investors to watch.

Microsoft executive discusses the power of Microsoft Azure

Image source: Microsoft.

Revenue growth

Microsoft's fiscal second-quarter revenue of $32.47 billion was up 12% year over year but was slightly below analysts' consensus forecast for revenue of $32.51 billion. The top-line miss may have investors watching the company's revenue growth more closely when the tech giant reports its fiscal third-quarter results.

In constant currency, Microsoft's fiscal second-quarter revenue increased 13% year over year. 

On average, analysts are expecting Microsoft to post fiscal third-quarter revenue of $29.8 billion, up 11.3% year over year. 

EPS growth

Microsoft's non-GAAP earnings per share (EPS) managed to barely beat analysts' average estimate in fiscal Q2. Non-GAAP EPS for the period was $1.10, up from $0.96 in the year-ago quarter. On average, analysts expected non-GAAP EPS of $1.09. 

Notably, Microsoft's profitability is trending better than it appears on the surface. In constant currency, non-GAAP earnings per share in fiscal Q2 increased 15% year over year.

For Microsoft's fiscal third quarter, analysts expect non-GAAP EPS of $1.00, up from $0.95 in the year-ago quarter. 

Commercial cloud revenue growth

A key driver for Microsoft's revenue growth in fiscal Q2 was the company's commercial cloud revenue, composed of revenue from Office 365 commercial, Azure, and Dynamics 365 -- products that are central to Microsoft's ongoing transition to a cloud-based business model.

Commercial cloud revenue increased 48% year over year in fiscal Q2 to $9 billion. This marked an acceleration over Microsoft's 47% year-over-year growth in commercial cloud revenue in the first quarter of fiscal 2019. The segment's growth during fiscal Q2 was "anchored by Azure [year-over-year] revenue growth of 76%," said Microsoft CEO Satya Nadella in the company's fiscal second-quarter earnings call.

Investors should look for similar growth in commercial cloud revenue in fiscal Q3, as Microsoft CFO Amy Hood noted in the company's fiscal second-quarter earnings call that she expects "continued strong performance in our commercial cloud business."

Microsoft will report its fiscal third-quarter results after market close on Wednesday, April 24.

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