Microsoft Beats, but Modestly

Microsoft Corp. (MSFT) reported fiscal 3rd quarter earnings after the closing bell today. On the headline things look pretty good — EPS of 61 cents per share topped the Zacks Consensus Estimate of 56 cents, and revenues of $16.43 billion beat the $16.19 billion expected.

However, the earnings beat is tied to a tax benefit worth 5 cents per share, which can thus be seen as Microsoft merely meeting expectations. Sales in the Consumer and Entertainment & Devices businesses were lackluster while the Business side was better than expected. Year over year, Microsoft posted a 30.6% net income gain and a 13.27% increase in revenue growth.

All the pressure on MSFT stock over the past 30 days has been downward. Seven of 26 estimates have been revised lower, though by negligible percentages. Today’s earnings beat of 8.9% is slightly below the average over the previous four quarters of 10.41%.

Traders in the after-market have been selling Microsoft on the news. Though the stock was up 33 cents per share (1.25%) in regular trading Thursday, since the company’s announcement MSFT shares have fallen 52 cents (1.95%) — more than giving back the gains made early in the day.

Ultimately, the Microsoft story is currently looking toward the future — specifically its joining forces with Nokia (NOK), the presence of a tablet product on the market and continuing growth in emerging markets. Microsoft’s numbers weren’t as strong as Intel’s (INTC) were last week, as piracy and a slowing PC market are bigger headwinds for Microsoft. However, its online gaming business looks better than Sony’s (SNE) does currently.

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