Microsoft (NASDAQ: MSFT) is a cash-generating machine. Its Azure and Office 365 secured $20 billion U.S. in cloud revenue. Investors may only expect more revenue and profits ahead in this high gross margin market.
Azure is Microsoft’s brightest spot. Revenue grew 89 percent, lifting the server products and cloud services unit’s revenue by 17% year-over-year. Office 365 commercial sales grew 42%.
The weak PC market did little to hurt Microsoft’s overall results. Though revenue fell 1% to $9.4 billion U.S., the company grew sales of the Surface product by 11%.
Analysts Raise Target
Analysts cheered Microsoft’s results by raising their price targets. BMO upped its PT to $94, from $86. Stifel set a $90 PT (up $5). RBC Capital Markets set an $88 target on the stock. Note that the upgrades come after MSFT stock jumped around 7% the day after the earnings report.
Takeaway
The PC segment is a drag on Microsoft’s growth potential but cloud revenue more than makes up for it. Should Intel’s (NASDAQ: INTC) and AMD’s (NASDAQ: AMD) refresh in PC chips spur sales, Microsoft will benefit. The growth in both PC and online software will send Microsoft stock to new highs in the quarters ahead. 2018 will look to be a bright year for Microsoft.
