Hello Risers,
It is earnings release season in the US equities market and Microsoft Inc, one of our portfolio companies, continued to record impressive quarterly financial performance. This is a testament to our rigorous investment research process that ensures Rise invests in the best companies that do well during good and uncertain economic realities.
Microsoft showed continued fundamental strength in its business and solid long-term prospects for the future according to its latest earnings result and call. The software giant grew revenue year over year to $51.7 billion. Net income climbed 21% to $18.8 billion, and that worked out to earnings of $2.48 per share, up 22% from year-ago levels.
Microsoft Office, cloud services, and Windows have all boosted the company’s revenues this quarter growing 19%, 25%, and 15% respectively as pandemic demand ensured that Microsoft shipped around 340 million PCs in 2021. Rise believes that the COVID-19 pandemic helped to accelerate some of the trends that were favoring Cloud Computing adoption among enterprise customers, and that had the effect of pulling some of Microsoft’s growth forward.
Meanwhile, LinkedIn’s revenue was also up 37% year over year, driven by strong advertising demand. Microsoft says LinkedIn sessions have also grown by 22%, with “record engagement,” including more than 20,000 events.
Finally, during the software giant’s earnings call last week, its CEO, Satya Nadella, discussed his vision for the metaverse. “We feel very well positioned to be able to catch what I think is essentially the next wave of the internet,” says Nadella. “I think the next wave of the internet will be a more open world where people can build their own metaverse worlds, whether they’re organizations, game developers, or anyone else.”
Given its industry leader moat and the growing adoption of Cloud Computing and in general, the increasing digitalization of the world accelerated by the Covid-19 pandemic, Rise believes Microsoft will continue to deliver strong earnings both now and in the future.
| Ratios | ||
| Q2 2020 | Q2 2021 | |
| Return on Equity | 11.87% | 11.73% |
| Return on Asset | 5.08% | 5.51% |
| EPS | $2.05 | $2.50 |
| Gross Margin | 67.05% | 67.21% |
| Net Margin | 35.90% | 36.28% |