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Microsoft Q4 earnings: everything you need to know

Microsoft shares climbed 2.6% in after-hours trade following the release of outstanding Q4 results.

Microsoft Source: Bloomberg

Microsoft Corp (All Sessions), the now $1.05 trillion tech giant posted impressive Q4 results after the market-close on Thursday. In response, investors pushed Microsoft's share price 2.66% higher in after hours-trade.

The company’s fast-growing cloud segment as well as its new-found strength in the team collaboration space were both highlights of Microsoft’s quarterly results.

Here's everything you need to know about the company's 2019 Q4 release:

Microsoft beats expectations

Microsoft Corp (All Sessions) demonstrated its global dominance with the release of its quarterly report, delivering strong increases across all key financial metrics.

Q4 revenue increased 12% to $33.7 billion and net income rose 21% to reach $10.6 billion.

Maybe most impressively, Microsoft beat analysts’ earnings estimates by 13%, delivering adjusted earnings per share (EPS) figures of $1.37. Prior to the Q4 release and according to Refinitiv, analysts expected Microsoft to report adjusted EPS figures of $1.21.

On these results, Microsoft’s CEO Satya Nadella said:

‘It was a record fiscal year for Microsoft, a result of our deep partnerships with leading companies in every industry.’

Other financial highlights from the quarter included a 25% increase in revenue and record levels of user engagement from Microsoft’s professional networking site, LinkedIn.

The company also saw modest growth in its more mature business segment – more personal computing – which rose 4% to $11.3 billion during the fourth quarter.

Cloud computing remains a key driver of growth

Microsoft’s advances into the cloud computing market has reignited the company’s growth story in recent years.

In this area, Amy Hood, executive vice president and chief financial officer of Microsoft reported that during the fourth quarter:

‘Commercial cloud revenue increased 39% year-over-year to $11.0 billion, driving our strongest commercial quarter ever.’

Regardless of Microsoft’s continued growth in cloud – competition in the space remains both concentrated and fierce.

Indeed, with the research site Canalys noting that 61% percent of the market is controlled by just four companies: Amazon Web Services, Google Cloud, Alibaba Cloud, and of course Microsoft Azure – investors will likely be keeping a close eye on Microsoft’s performance in this area going forward.

Slack has a headache on its hands

Another highlight from yesterday's Q4 results was Microsoft’s aggressive expansion in the teams collaboration space.

Recent reports of Microsoft overtaking just-listed rival Slack – in terms of daily-active-user counts was reiterated in the company’s Q4 earnings call.

Here, CEO Satya Nadella pointed out that:

‘Teams now has more than 13 million daily active users and 19 million weekly active users.’

Yet Microsoft’s ambitions in this space aren’t limited to a mere numbers-game. Speaking of future opportunities, CEO Satya Nadella said:

‘Bringing Teams to new and underpenetrated markets including healthcare, hospitality and retail, as well as firstline workers’ is a key priority moving forward.

The growth outlook remains steady in Q1 2020

Finally, Microsoft Corp (All Sessions) has forecasted a slight decrease in revenue growth across all three of its key business segments for Q1 2020.

While this forecast may look disappointing at first glance, Microsoft's immense size, impressive Q4 results and strong financial position underscore the fact that a company cannot grow at an exponential rate indefinitely and nor do investors necessarily expect it to.

Moreover, according to the Wall Street Journal, given that Microsoft has beaten analyst estimates in all of the previous four quarters, investors are likely to appreciate the company's prudent financial forecasts.

Ultimately, just like Amazon’s obsessive customer focus, Microsoft’s own commitment to innovation and a customer-centric approach have likely been one of the main driving forces behind the company's sustained share price gains in recent years.

Microsoft’s CEO, Satya Nadella himself pointed out that:

‘Every day we work alongside our customers to help them build their own digital capability - innovating with them, creating new businesses with them, and earning their trust. This commitment to our customers’ success is resulting in larger, multi-year commercial cloud agreements and growing momentum across every layer of our technology stack.’

With all of this considered, it is hardly surprising that Microsoft's share price rose 2.6% in after-hours trade overnight.

Year-to-date Microsoft’s share price is up 34%.

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