Microsoft shares hit 15-year high

Microsoft’s shares touched their highest point in 15 years in after-hours trading on Thursday, as it beat revenue and earnings forecasts in the quarter to September and posted its first ever profit in search.

An 8.3 per cent jump in after-hours trading to $52.00, its highest level since 2000, saw Microsoft join a strong afternoon for Silicon Valley companies as Amazon reported a surprise profit and Alphabet , Google’s new parent company, announced its first ever share buybacks.

Revenues at Microsoft were down 2 per cent to $21.7bn after adjusting for certain items and currency fluctuations, just ahead of Wall Street’s forecasts, with earnings up to 9 cents ahead of expectations at 67 cents. Net income was up 2 per cent to $4.6bn compared with the same quarter a year ago.

Analysts said that a strong showing from the Windows business was responsible for the outperformance, as the company bounced back after reporting its worst net loss  three months ago.

Amy Hood, Microsoft’s finance chief, said that Bing, its search unit, had hit an “important milestone” as it reached profitability for the first time, on revenues that grew 29 per cent to more than $1bn. Microsoft entered the search business in the late 1990s and launched Bing in May 2009.

“We expect Bing’s strong trajectory to continue, remaining profitable for the remainder of the year,” she added, despite its search partner Yahoo striking a new deal with Google this week.

Through Cortana, its virtual assistant, Bing is deeply integrated into Windows 10, which boosted usage, Microsoft said. Since July, 110m devices have been updated to Windows 10, three times as many as Windows 7 by the same point after release. Most of those updates are by consumers but 8m business PCs are now running Windows 10, the company said.

The results marked the first time Microsoft has reported after reorganizing five operating segments into three.
More personal computing”, the Windows and smartphone business, saw sales fall 13 per cent on a constant currency basis to $9.4bn. Microsoft said that while Windows revenue from hardware manufacturers fell 6 per cent, it performed better than the overall PC market.

However, the PC business was dragged down by a 54 per cent drop in phone revenues, after Microsoft wrote off $7.5bn in assets acquired from Nokia in the last quarter.

Sales at its second-largest unit, “productivity and business processes”, which includes Office, were up 4 per cent to $6.3bn. Office 365 revenues grew almost 70 per cent, as consumer subscriptions to its internet-based productivity suite rose 17 per cent to 18.2m.