The stock was rising 3.91% to $129.90 a share on Thursday and briefly crossed $1 trillion in market cap when it hit an all-time intra-day high of $131.37 earlier in the morning.
Microsoft’s earnings per share for its fiscal third quarter of 2019 rose 20% year-over-year to $1.14, handily surpassing Wall Street’s expectations of $1.00. Revenue of $30.2 billion, which beat analyst expectations of $29.88 billion, was driven by Intelligent Cloud, whose revenues grew 22%, year over year. Azure revenue, specifically, grew 73%, just short of last quarter’s growth rate of 77%.
Microsoft shares are up 28.2% year-to-date, outpacing the tech-heavy Nasdaq’s 21% gain over the same time period.
Analysts all over Wall Street upped their valuations.
WedBush, Outperform, Raised PT From $150 to $155
“We view last night’s March results as another feather in the cap for Nadella in the company’s quest to become a cloud behemoth as Azure grew 73% year over year and continues to gain share vs. the likes of AWS and Amazon,” analyst Dan Ives wrote in a note out Thursday morning. “This quarter was an absolute ‘blow out quarter’ across the board with no blemishes and in our opinion speaks to an inflection point in deal flow as more enterprises pick Redmond for the cloud.”
Ives had already moved his price target to $150 from $140 last week, ahead of the earnings print.
Duetsche Bank, Buy, Raised PT From $130 to $145
“Against high Street expectations, MSFT delivered what we’d characterize as out-standing 3QF19/March quarter results,” wrote analyst Karl Keirstead. “Azure c/c growth held steady at close to 80% (appreciably higher than AWS) despite the increase in scale.”
JPMorgan, Overweight, Raised PT From $125 to $145
“Microsoft also pointed to the possibility of Azure becoming larger than its per-seat or per-user businesses, which is remarkable given its high-performing large scale seat/user-based businesses,” wrote analyst Mark Murphy in a note. “This aligns with our recent commentary highlighting Azure’s ability to capture greater share of net-new IaaS workloads.”
Jefferies, Underperform, Raised PT From $75 to $80
Although impressed by the better-than-expected cloud performance, analyst John Difucci thinks the transition to the cloud will pressure margins (expanded to 63% for the quarter), and that Microsoft’s cloud margins won’t reach Amazon’s (AMZN – Get Report) .
“Our concern has not been about rev growth, it’s been about the long-term profit of this business,” Difucci wrote. “Most investors seem to think that Azure will evolve similar to AWS, expanding margins with scale. We have questioned whether Microsoft will ever see the profit margin of AWS at similar scale.”