Microsoft Corp. (NASDAQ: MSFT) reported its second-quarter financial results Monday after the markets closed as $0.71 in earnings per share and $26.5 in revenue. That was against Thomson Reuters consensus estimates of $0.71 in earnings per share and $26.33 billion in revenue. The second quarter from last year had $0.78 in earnings per share and $24.52 billion in revenue.

The Device and Consumer segment revenue grew by 8% to $12.9 billion. Some of the key drivers within this segment were Xbox console sales totaling 6.6 million units, Search advertising revenue rose 23%, and Bing market share rose 1.5% to 19.7% year-over-year. Surface revenue was up in the second quarter by 24% to $1.1 billion from Surface Pro 3 sales.

However, both Windows OEM Pro and non-Pro revenue fell 13% each in the Device and Consumer segment.

The Commercial segment revenue grew 5% to $13.3 billion. A key driver was commercial cloud revenue, which grew 114%, and it is now on an annualized revenue run rate of $5.5 billion. Server products and services revenue increased 9% and Windows volume licensing revenue increased by 3%.

A notable decline in the Commercial segment revenue came in Office commercial products and services, which saw its revenue decline by 1%.

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Gross margin for the second quarter was $16.3 billion or 61.5%.

Looking at Microsoft’s performance within the past year we can see that the company hit a multiyear high. Some investors might be wondering, if earnings were in line with the estimates, why would shares respond negatively? Suffice it to say, the stock has all but nearly doubled in the past two calendar years, but to keep this pace and continue with that growth these earnings had to be spectacular, not just in line.

Kevin Turner, COO of Microsoft, said:

We again saw enthusiasm and demand around our cloud offerings like Office 365, Dynamics CRM Online and Azure, as well as Surface Pro 3. Our sales engagement worldwide continues to focus on helping customers and partners transition to the cloud and navigate the shifting product mix related to our services and solutions.

A few days ahead of the earnings report, several analysts had weighed in on where Microsoft’s stock price may be going. The consensus analyst price target for the stock is $50.03, and the highest listed analyst price target is $58. These are some recent analyst calls we have seen:

• Citigroup has a Hold rating and set its price target at $50.00.
• CLSA has a Buy rating and set its price target to $53.00.
• Cowen has a Hold rating and set its price target to $50.00.

Shares of Microsoft closed Monday down 0.4% at $47.01. In post-market trading, shares were down 3% at $45.57. The stock has a 52-week trading range of $35.69 to $50.05. Microsoft has a market cap of $387 billion.

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