Microsoft looks unstoppable: analyst

Those select few on Wall Street waiting for tech giant Microsoft (MSFT) to stumble a bit amid sky-high expectations will have to wait another quarter. Or maybe another year.

The company had a litany of wins in its most recent quarter that suggests business momentum will be sustained for some time, Jefferies tech analyst Brent Thill thinks.

First, sales of Microsoft’s cloud service Azure rose an impressive 50% year-over-year as companies continued to pull forward cloud spending as workforces stay remote. The growth rate on Azure sales bested consensus estimates for 41% growth, and accelerated from the 48% growth in the third quarter.

It looked even more impressive when stacked up to disappointing cloud sales growth at IBM last week.

The logo of Microsoft is displayed outside the headquarters in Paris, Friday, Jan. 8, 2021. As the pandemic raged through the U.S., Microsoft's business continued chugging ahead and beat Wall Street expectations for the last three months of 2020, powered by ongoing demand for its workplace software and cloud computing services as people worked from home. The company on Tuesday, Jan. 26, 2021 reported fiscal second-quarter profit of $15.5 billion, up 33% from the same period last year. (AP Photo/Thibault Camus, file)

Second, all three of Microsoft’s reportable segments beat consensus revenue estimates apart from cloud demand, consumers bought more PCs and played a ton of Xbox.

And last but least, Microsoft’s operating margin was well above estimates, points out Thill.

Keep in mind all this strong growth comes as Microsoft cycles robust year ago growth rates and navigates the challenges brought on by the pandemic.

Here’s how Microsoft performed compared to Wall Street estimates in the fourth quarter.

• Revenue: $43.1 billion versus $40.2 billion expected

• Earnings per share: $2.03 versus $1.64 expected

• Intelligent Cloud: $14.68 versus $13.76 billion expected

• More Personal Computing: $15.12 versus $13.55 billion expected

Microsoft will have no time to rest on its laurels.

“The biggest question is how much better can it get with Microsoft beating almost every single metric in the quarter. Microsoft appears primed for durable double-digit revenue and operating income growth on the back of its WFA stack with Azure, Teams, Security, Windows and Gaming,” Thill adds.

The Street is banking on the business continuing to perform at a high level at least for the balance of 2021.

Eight sell-side analysts that cover Microsoft reiterated their Buy ratings on Microsoft on Wednesday — seven of them lifted their price targets on the stock. The Street is bullish on Azure and a recovery later this year in commercial-related sales.

“Microsoft remains a tough stock to bet against,” wrote Raymond James tech analyst Robert Majek.

Yahoo Finance tech editor Dan Howley contributed to this story.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

What’s hot from Yahoo Finance:

• T-Mobile CEO on his response to the Capitol Hill riots

• Melinda Gates: we are giving $250 million more to the COVID-19 relief effort

• Olympics great Michael Phelps: the COVID-19 pandemic hasn’t been all smiles for me

• Lululemon founder: retail will rally back after the pandemic

• Walmart CEO: the lack of stimulus is taking its toll

Watch Yahoo Finance’s live programming on Verizon FIOS channel 604, Apple TV, Amazon Fire TV, Roku, Samsung TV, Pluto TV, and YouTube. Online catch Yahoo Finance on Twitter, Facebook, Instagram, Flipboard, SmartNews, LinkedIn, and reddit.