MicroStrategy Incorporated Stock Jumps as Earnings Soar

John Edgar, Vice President for the US Postal Service, speaking at a recent MicroStrategy conference. Credit: MicroStrategy via Facebook.

Shares of MicroStrategystock were up 3.71% at 4:10 pm EDT Tuesday evening as investors reacted to the business intelligence, or BI, provider's massive spike in Q1 earnings. Here's a closer look at the final totals versus Wall Street's projections:

MSTR Revenue YOY Growth EPS YOY Growth
Consensus estimate $135.32 million (1.9%) $0.91 N/A
Q1 actuals $123.87 million (10.2%) $1.79 N/A
DIFFERENCE ($11.45 million) (8.3%) $0.88 N/A

Sources: S&P Capital IQand MicroStrategy press release.

Commenting on his company's strategy for boosting top-line growth, CEO Michael Saylor said in a press release:

What went right: Cost-cutting. MicroStrategy has systemically reduced headcount and cut expenses in every area. Overall, operating costs fell 34.5% year over year while revenue fell just 10.2%. The difference allowed MicroStrategy to bank savings as cash flow from operations, which quintupled to $55.8 million.

What went wrong: Some spending cuts were so severe that they appear unsustainable. Take research and development, which fell 45.1%, as MicroStrategy prepared to ship its newest platform -- MicroStrategy 9s -- and a complementary security platform called Usher, in January. The new products mean significant R&D spending shouldn't be needed for a while. But it will be needed someday, at which point MicroStrategy's profits could take a substantial hit.

What's next:MicroStrategy chose not to include a second-quarter outlook in its press release. Analysts tracked by S&P Capital IQ have the company generating $142.25 million in revenue and $1.47 a share in adjusted profit versus $141.85 million and a $0.91 per-share loss in last year's Q2. Longer term, analysts have MicroStrategy growing earnings by an average of 15%annuallyduring the next three-to-five years.

In terms of the overall business, Investors should keep a close eye on the delta between revenue and expense growth. MicroStrategy is going to need innovation achieved with higher R&D spending to keep young and hungry BI and analytics providers such asTableau Software at bay.

The article MicroStrategy Incorporated Stock Jumps as Earnings Soar originally appeared on Fool.com.

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