In the first quarter of 2024, Microsoft once again exceeded expectations by reporting a $2.94 earnings per share, surpassing analyst estimates of $2.82, and $61.9 billion in sales, beating projections of $60.9 billion. Particularly impressive was the $12.5 billion in operating income generated by its AI-heavy intelligent cloud division, well above the anticipated $12.1 billion. Following this strong performance, Microsoft’s shares surged by 5% in after-hours trading, demonstrating investor confidence in the company’s continued success.
Despite this positive outcome, Microsoft’s stock had recently experienced a setback with one of its largest losses of the year, as shares dipped over 2% due to investor disappointment in Facebook parent Meta’s results. This decline contributed to a broader tech sell-off in the market. Nevertheless, Microsoft’s shares have seen an 8% increase year-to-date and a substantial 45% growth over the last 12 months during normal trading hours on Thursday. As a major player in the tech industry, Microsoft has emerged as a leader in artificial intelligence alongside Nvidia, benefiting from its early investment in OpenAI and subsequent translation of AI advancements into tangible business results.
Earlier in the year, Microsoft claimed the title of the world’s largest company by market capitalization, surpassing Apple. Microsoft’s market cap of $2.9 trillion remains significantly higher than Apple’s, reflecting its superior earnings growth trajectory. Consensus estimates suggest that Microsoft is on track to outperform Apple in gross profit by their respective fiscal years in 2028, marking a significant shift in the competitive landscape. With an EBITDA of $27.6 billion in the last quarter, Microsoft is the second most profitable American company by EBITDA, trailing only Apple, which reported $43.2 billion in the same period. This substantial earnings figure highlights Microsoft’s dominance within the industry.
The market’s perception of Microsoft has evolved significantly in recent years, with investors now valuing the company at a higher rate compared to the turn of the millennium. Microsoft’s price-to-sales ratio has more than doubled over the past decade, reflecting optimism about the company’s growth potential and ability to expand its business successfully. The company’s strategic focus on areas like artificial intelligence and cloud computing has paid off, with operating profits from its AI-heavy cloud division seeing a 48% annualized growth rate over the past five years. Microsoft’s ability to capitalize on technological advancements and deliver tangible results has contributed to its status as a top performer in the market.
Overall, Microsoft’s strong performance in the first quarter of 2024 has reinforced its position as a leading player in the tech industry. The company’s ability to consistently surpass analyst expectations and deliver robust earnings figures has garnered investor confidence, leading to a positive response in the stock market. By leveraging its expertise in artificial intelligence and cloud computing, Microsoft has solidified its status as a key player in the digital age. Moving forward, continued growth in these areas is expected to drive Microsoft’s success and maintain its position as a top-ranking company in the market.
