Skip to Content
US Videos

Microsoft One of the Best Opportunities Today

A stellar third quarter underscores the wide-moat firm's strength, and shares are trading at a sizable discount to our fair value estimate.

Mentioned:

Rodney Nelson: Wide-moat Microsoft reported third-quarter results that came in well ahead of our expectations as the firm saw strength across all three of its major business lines. This was the first quarter that Microsoft was lapping a fully comparable period including LinkedIn, and those results were stellar across the board. Third-quarter revenue rose 16% year over year to $26.8 billion, roughly $1 billion ahead of our internal estimate. The strength could be realized across productivity and business processes including 42% commercial revenue growth for Office 365 and 1.4 million net new users of Office 365 on the consumer side. On the intelligent cloud front, Azure grew 93% year over year, marking the third straight quarter that the business has grown in excess of 90%. We continue to expect outsize growth for Azure moving forward as we view it as one of the top tier competitors in public cloud infrastructure and platforms of service.

Finally, the business continues to see strong adoption of Windows 10, lifting Windows revenue contributions significantly and staving off longer term secular declines in PC operating systems. The Windows commercial business grew 11% year over year although the consumer business tracked more closely with the PC market, falling 8% year over year.

Rodney Nelson does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.

We’d like to share more about how we work and what drives our day-to-day business.

We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.

How we use your information depends on the product and service that you use and your relationship with us. We may use it to:

  • Verify your identity, personalize the content you receive, or create and administer your account.
  • Provide specific products and services to you, such as portfolio management or data aggregation.
  • Develop and improve features of our offerings.
  • Gear advertisements and other marketing efforts towards your interests.

To learn more about how we handle and protect your data, visit our privacy center.

Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.

To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.

Read our editorial policy to learn more about our process.