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Microsoft’s Q4 2023 Earnings Preview

Microsoft Corporation (MSFT) is set to announce its fourth-quarter earnings results today, with a follow-up call scheduled at 5:30 PM ET. This article will delve into an in-depth analysis of what to expect, the potential ramifications, and key areas to watch.

Earnings Estimates and Forecasts

According to FactSet’s consensus estimate, Microsoft is anticipated to report non-GAAP earnings per share (EPS) growth of 14% year over year to $2.55, with a revenue projection of 7% year-on-year increase to $55.49 billion. Notably, Microsoft’s usual practice is to release its 8-K around 16:03 ET before publishing the results on its official website. Additionally, Microsoft provides guidance for next quarter’s revenue during the call, which investors should pay close attention to.

Business Segments

Microsoft operates in several key sectors, and understanding the breakdown by segment is crucial. The company’s three primary sectors are Productivity and Business Processes, Intelligent Cloud, and More Personal Computing.

  1. Productivity and Business Processes: This segment encompasses Office 365, LinkedIn, Dynamics 365 (cloud-based ERP and CRM applications).
  2. Intelligent Cloud: Includes Azure, SQL Server, Windows Server, and the recently acquired Nuance.
  3. More Personal Computing: Consists of Windows, Surface, and Xbox.

The performance of these three divisions will be of immense interest to investors and industry observers.

Recent Developments

In recent developments, Microsoft’s pending acquisition of Activision Blizzard is under scrutiny by Federal Trade Commission (FTC) and United Kingdom regulators. Investors will eagerly await any updates on this front.

Historical Performance

In the previous quarter, Microsoft’s stock witnessed a significant surge following its most substantial EPS beat in the last eight quarters. The company also provided revenue guidance for Q4 in line with expectations. These positive indicators may bode well for the upcoming earnings report.

Azure Growth

Arguably, Azure, Microsoft’s cloud computing service, is the most closely monitored segment. Azure reported a growth rate of 27% in the March quarter, with a constant currency growth rate of 31%. This performance is generally in line with the low-30s constant currency prior guidance, and arguably better than feared, given the macroeconomic headwinds. However, Azure’s growth has been slowing, dropping from 38% CC in the December quarter, 42% CC in the September quarter, and 46% CC in the June quarter. Microsoft is forecasting a 26-27% CC for the June quarter.

The Week Ahead in Tech Earnings

The week promises to be an exciting one for mega-cap tech companies, with Microsoft and Alphabet (GOOG) kicking things off today. Facebook’s parent company, Meta Platforms Inc. (META), is due to report on July 26, followed by Amazon (AMZN) on August 3.

Stock Performance and Investor Sentiment

Microsoft’s stock has seen a strong upswing in recent months, rising around 40% since early March. This uptick suggests that investor sentiment might be riding high as we approach this earnings report, which could mean heightened expectations. Hence, caution is advisable for those trading on this news.

To conclude, the announcement of Microsoft’s Q4 earnings today, will surely be the focal point for many investors and market watchers. As we navigate through the complexity of the global economic landscape, these results will not only influence Microsoft’s future but also offer broader insights into the health of the tech sector and the global economy as a whole. The stakes are undoubtedly high, and as we inch closer to the close, the anticipation only builds.




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