Microsoft Earnings Get Boost From Xbox One, Surface

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Microsoft Corp. (NASDAQ: MSFT) reported second-quarter fiscal 2014 results after markets closed Thursday. The software behemoth reported diluted earnings per share (EPS) of $0.78 on revenues of $24.52 billion. In the same period last year the company reported EPS of $0.76 on revenues of $21.46 billion. The consensus estimate called for EPS of $0.68 on revenues of $23.68 billion.

OEM sales of the company’s Windows operating system fell 3% largely due to “continued softness in the consumer PC market.” Microsoft said that sales of the Pro version of Windows rose 12%.

The company also reported sales into its retail channel of 3.9 million Xbox One game consoles and 3.5 million Xbox 360 consoles in the quarter.

Sales of the company’s Surface tablet more than doubled sequentially to $893 million in the second quarter.

Microsoft did not offer guidance in its press release, but said that it would provide guidance during its conference call later this afternoon.

The consensus estimate for third fiscal quarter 2014 EPS is $0.66 on revenues of $20.47 billion. For the full fiscal year ending in June EPS is forecast at $2.66 on revenues of $83.72 billion.

The company’s COO said:

We significantly outpaced enterprise IT spend as we continue to take share from our competitors by delivering the devices and services our customers need as they transition to the cloud. Our commercial cloud services revenue grew more than 100% year-over-year, as customers are embracing Office 365, Azure, and Dynamics CRM Online, and making long-term commitments to the Microsoft platform.

Of Microsoft’s $24.52 billion in quarterly revenues, just $5.38 billion comes from its Devices and Consumer Licensing group, a year-over-year drop of 5.6% for the quarter. The Commercial Licensing group’s revenue rose 7.4% to $10.89 billion. Microsoft’s gross margin for the quarter amounted to $16.24 billion, up about 3% over the second quarter a year ago.

Today’s report is pushing the share price up about 2.6% at $36.99 in after-hours trading. The stock’s 52-week range is $27.10 to $38.98. Prior to today’s release Thomson/Reuters had a consensus price target of around $37.30 on the company’s shares.

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