Microsoft - Q1 Strong Revenue & Earnings Beat

On Tuesday night Microsoft released Q1 results which smashed the already high expectations. Revenues came in at a whopping $37.2bn, ahead of the expected $35.8bn, thanks to outperformance in all three of their main segments. Earnings per share also comfortably beat the street, coming in at $1.82 versus expectations of $1.54. Gross margins came in at 70.4% and operating cash flow reached $19.3bn. Mouthwatering stuff.

Productivity and Business Processes which includes commercial Office, LinkedIn and commercial cloud services increased 11% to 12.3bn. Intelligent Cloud, which is mostly Azure cloud services, increased 20% to $13bn and Personal Computing increased 6% to $11.8bn.

Rockstar CEO Satya Nadella had the following to say. "The next decade of economic performance for every business will be defined by the speed of their digital transformation. We are innovating across our full modern tech stack to help our customers in every industry improve time to value, increase agility, and reduce costs."

We couldn't agree more, the world is digitising fast. The recent epidemic has made that shift happen even faster. Microsoft has positioned themselves to be at the forefront of digital workplaces, cloud computing, gaming, video conferencing and online job networking (LinkedIn).

Microsoft is now a $1.6 trillion company and the shares are trading near all-time highs. Considering their incredible financial position, their dominant place in the digital world and their exciting growth prospects, it makes sense to be such a valuable company. Even so, the shares trade at 26 times next years earnings which we think presents plenty of potential upside. Buy this one and hold it for decades.