Microsoft Corporation (NASDAQ:MSFT) released its fiscal first-quarter 2019 earnings after the bell yesterday. Considering the drubbing the market — and Nasdaq in particular — has been taking, it was understandable if market sentiment was less than generous. But Microsoft stock rallied 4% after the bell on strong earnings results.

It’s important to bear in mind, as MSFT stock rallied, the Nasdaq-100 entered bear market territory.

The other encouraging thing about MSFT’s performance is this is all real earnings and revenue growth. These numbers aren’t muddied by big stock buybacks that artificially boost earnings.

The breakdown is MSFT reported earnings of $1.14 per share and the expectations were for 96 cents a share.

Revenue came in at $29.08 billion for the quarter compared to the expectation of $27.90 billion by analysts.

The one thing that slowed analysts joy was the fact that, as with many large corporations this earnings season, Microsoft stock pulled back a bit on its guidance for the next quarter.

It offered a range between $31.9 and $32.7, including revenue from its new acquisition, development hub GitHub.

Analysts’ expectations are at $32.25, so it isn’t too far off from analysts’ expectations.

But any whiff of underperformance is punished quickly and harshly in today’s market. Most importantly, Microsoft is firing on all cylinders. This is important in this kind of market. All its divisions are growing well, so it isn’t relying on one division to keep the lights on in other divisions. This kind of consistency and stability is a crucial point when competitors in various sectors lean heavily on one or two products. MSFT has a competitive advantage.

One of its key initiatives moving forward is rolling its cloud products — like Office 365, its Dynamics suite and LinkedIn Recruiter — into its commercial cloud business on its Azure platform. Bear in mind, Azure growth has dropped from 116% in Q1 17 to 90% in Q1 18 to 76% in Q1 19. But much of this is simply because it has been bringing on customers at such a rapid pace for a while now, so growth gets slower as their base gets larger.

For example, going from five customers to 10 customers is 100% growth, but going from 1,000 to 1,500 customers is only 50% growth. Bringing in 500 new customers is more preferable to bringing on five, but the percentages distort the growth.

The point is, Azure is key to MSFT’s growth strategy since it can leverage it for its commercial and consumer software offerings as well as a standalone cloud services product.

In the first quarter of 2018, Azure actually grew its revenue more than its chief competitor Amazon (NASDAQ:AMZN), which shows the strength of the Azure strategy.

Also remember, now that many companies have joined the AWS cloud (AWS holds about 41% public cloud market share, and Azure has about 29% market share, according to SkyHighNetworks.com.

The bottom line on Microsoft stock: Use the current short-term volatility and tech selloff to build your MSFT position for the long term.

— Louis Navellier

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Source: Investor Place