In the first quarter of 2024, Microsoft outperformed analysts’ expectations, reporting $2.94 earnings per share, topping estimates of $2.82, and $61.9 billion in sales, exceeding projections of $60.9 billion. The company’s operating income in its AI-heavy intelligent cloud division also surpassed estimates at $12.5 billion, compared to $12.1 billion expected. As a result, Microsoft’s stock surged 5% in after-hours trading, showcasing the confidence Wall Street has in the tech giant.
Just prior to this impressive earnings report, Microsoft experienced a significant dip in its stock price due to investor disappointment in Meta’s results, which led to a broader tech selloff. However, Microsoft shares have risen 8% year-to-date and 45% over the last 12 months, outperforming the S&P and Nasdaq indexes. The company has shifted the narrative of not being on the cutting edge to becoming a leader in artificial intelligence, thanks to investments in OpenAI and the growth of its AI-heavy cloud computing division, which has seen a 48% annualized rate over the last five years.
Microsoft’s market capitalization of $2.9 trillion makes it the world’s largest company, surpassing Apple, with a $300 billion higher market cap. Analysts anticipate Microsoft will outperform Apple in gross profit by 2028, a significant change from Apple’s lead in net income in 2023. In the last quarter, Microsoft generated $27.6 billion in earnings before interest, taxes, depreciation, and amortization (EBITDA), positioning it as the second-most profitable American company behind Apple, which brought in $43.2 billion in its most recent quarter.
The company’s dominance in the market is highlighted by its EBITDA being around 55 times higher than the median S&P 500 company, solidifying Microsoft’s strong financial position and growth trajectory. Microsoft’s strategic focus on artificial intelligence and cloud computing has translated into concrete results, driving its stock performance and investor confidence. The tech giant’s ability to adapt to changing market trends and priorities, such as the rise of AI, has propelled it to the forefront of the industry, signaling continued success and growth in the coming years.
With its impressive earnings performance and market dominance, Microsoft reaffirms its position as a powerhouse in the tech sector, setting the bar high for its competitors. Investors continue to show strong support for the company, valuing its innovative approach and financial stability. Microsoft’s ability to deliver robust financial results, particularly in its AI and cloud divisions, reinforces its status as a market leader and signals a bright future ahead for the tech giant.
