Jefferies analyst on Microsoft Q2 results: ‘this is not good for tech’

Microsoft Corporation (NASDAQ: MSFT) reported a record $50 billion in sales for the holiday quarter on Tuesday. Its Q2 results came in ahead of Street estimates; still, shares tanked 5.0% in after-hours trading.  

Notable figures in Microsoft’s earnings report

Microsoft noted $18.8 billion in earnings or $2.48 per share versus the year-ago figure of $2.03 per share. It generated $51.73 billion in revenue – a YoY increase of 20%. According to FactSet, experts had forecast $2.32 of EPS on $50.71 billion in revenue.

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The American multinational recorded 46% growth in Azure. Revenue was up 15% in More Personal Computing, 25% in Intelligent Cloud, and 18% in Productivity and Business Solutions – all quarterly records and ahead of FactSet consensus.

The news comes only days after Microsoft said it will buy Activision Blizzard for $68.70 billion in cash. Executives are expected to give future guidance on the earnings call.

Brent Thill’s take on Microsoft’s quarterly results

Despite record results, Jefferies Brent Thill is somewhat disappointed in Microsoft’s Q2 report. On CNBC’s “Closing Bell”, the analyst said:

It wasn’t what the buy-side wanted. This is not good for tech. It’s the smallest beat we’ve seen in Microsoft for a while. Intelligent Cloud and Productivity was roughly in line, most of the beat was in personal computing. That’s not where we wanted to see the beat.

A 37% growth in bookings, however, was remarkable, he added. According to Thill, Microsoft’s guidance will ultimately set the direction for the stock, which he expects to be on the conservative side.

Numbers weren’t as good as the Street wanted. Therefore, they might be more conservative on the guide. If they say the pipelines are phenomenal, they haven’t seen any deterioration in the overview of what their customers are doing, that’ll get the stock going.

He, however, agrees that MSFT is inexpensive at current levels. The stock’s down more than 15% from its ATH late last month.