Microsoft Corporation Earnings Preview: Has Growth Peaked?

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Microsoft Corporation (MSFT) Information Technology – Software | Reports January 25, After Market Closes

Microsoft Earnings Preview – Key Takeaways

  • The Estimize consensus is calling for earnings per share of 81 cents on $25.37 billion, 2 center higher than Wall Street on the bottom line and $160 million on the top
  • Clouding computing and Productivity business remain two strong points while personal computing continues to slide
  • Investors expect that integrating LinkedIn with Azure and other CRM products to boost sales and capture greater market share
  • What are you expecting for MSFT? Get your estimate in here!

Microsoft operating systems power personal computers, but its cloud computing that now drives financial performance. After multiple years of sluggish PC demand, Microsoft made a complete 180 and began focusing on the rapidly growing cloud sector. The company’s native Azure platform now sits firmly atop the cloud computing space, just behind Amazon Web Services. Investors remain optimistic that Microsoft can build on its recent success as Azure captures more market share and reaches a wider audience. Meanwhile, the upcoming Trump administration and completion of the Linkedin deal add a new layer of interest ahead of the company’s fiscal second quarter.

Analysts forecast earnings to climb 3% to 81 cents per share, according to the Estimize consensus data. That estimate increased by 2% since Microsoft’s most recent report 3 months ago. Revenue for the period is expected to decline by 1% to $25.34 billion, marking negative comps for the first time in a year. In the past 6 months shares have increased by 12% and historically make an additional 1% jump through the print.

Microsoft faces a delicate balancing act between its booming cloud business and struggling personal computing. In the first quarter revenue from cloud computing, consisting of server products, Azure and enterprise services, grew 8% to $6.4 billion. Azure, in particular, grew 116% with usage nearly doubling from a year earlier. Productivity business, which mainly comprises Office and Office 365, jumped up 6% to $6.7 billion, with Office 365 subscribers reaching nearly 24 billion. As expected, Personal computing declined 2% on a 72% decline in phone sales and 5% in gaming.

Investors expect that integrating Linkedin with Azure and other CRM products can continue to boost sales and usage. The move aims to capture Salesforce user base of sales and marketing professionals that could benefit from an all in one platform.

Microsoft’s growth strategy doesn’t stop at just cloud computing. Through several acquisitions the company aims to break ground in the fast emerging Internet of Things and Artificial Intelligence markets. Touching multiple fast growing markets can help offset the ongoing losses in personal computing.

Of course a few headwinds stand in Microsoft’s way for another strong report. Weak FX translation along with macroeconomic volatility put international operations at risk for a down quarter. Additional uncertainty surrounding President Trump and his forthcoming policies create new risks for companies like Microsoft.

Microsoft Earnings Preview

Do you think MSFT can beat estimates? There is still time to get your estimate in here!

Article by Estimize

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