Microsoft Corp. (MSFT, Financial), the application software giant founded by Bill Gates (Trades, Portfolio), said revenues for the 12 months ending June 30 increased 14% year over year, highlighted by significant growth in intelligent cloud and commercial cloud revenues.
The Redmond, Washington-based company reported fiscal fourth-quarter revenues of $30.1 billion and full-year revenues of $110.4 billion. For the quarter, net earnings of $1.14 per share outperformed analyst estimates by approximately 6 cents.
Company continues strong momentum in intelligent cloud through Walmart partnership
Microsoft Chief Financial Officer Amy Hood said “exceptional sales execution” delivered double-digit growth across the company’s business segments, which include productivity and business processes, intelligent cloud and more personal computing. Productivity and business processes revenues increased 13% year over year on continued momentum in Office Consumer and Office Commercial while Intelligent Cloud revenues increased 23% year over year, driven by 89% revenue growth in Microsoft Azure.
Walmart Inc. (WMT, Financial) announced on Tuesday that it launched a five-year strategic partnership with Microsoft to further accelerate the company’s digital transformation in retail, strengthening its position to combat e-commerce giant Amazon.com Inc. (AMZN, Financial). The partnership allows the Bentonville, Arkansas-based company to leverage Microsoft’s cloud to “capitalize on the depth and breadth of Microsoft’s compute capacity” and integrate Microsoft Azure and Office 365 into the Walmart.com platform.
Gurus maintain large holdings in Microsoft despite significantly high valuations
Microsoft traded approximately $1 higher than its closing price of $104.40 in the first hour of post-market trading.
GuruFocus ranks Microsoft’s business predictability 3.5 stars out of five as the company has consistent revenue and earnings growth. The company’s operating margins are outperforming 93% of global competitors, which include Oracle Corp. (ORCL, Financial), VMware Inc. (VMW, Financial), CA Inc. (CA, Financial) and F5 Networks Inc. (FFIV, Financial).
Although the company has good growth potential, GuruFocus lists seven medium warning signs for Microsoft, including a dividend yield near a 10-year low and price valuations near a 10-year high. The company is trading near its maximum price-book and price-sales values, suggesting significant overvaluation.
The high valuations did not scare away investors as over 18 gurus have positions in Microsoft according to aggregated portfolio data. Gurus with large positions in Microsoft include PRIMECAP Management (Trades, Portfolio), Dodge & Cox, Pioneer Investments (Trades, Portfolio) and Ken Fisher (Trades, Portfolio).
Disclosure: No positions.
