Microsoft, Alphabet, and More Earnings
Microsoft is due to report March quarter earnings after the close of trading on Thursday, and you can be sure that the focus is going to be on the cloud and artificial intelligence.
There are reasons to feel optimistic. Demand for personal computers is showing signs of improvement, which could boost sales of Windows and Office software, among other things.
But what investors will most want to see are signs of progress on the company’s push to make money from AI, including the Copilot software for the company’s 365 suite of productivity applications. Another focus will be growth in its Azure cloud-computing segment, which has been expanding faster than Amazon Web Services and Google Cloud.
Consensus expectations among analysts tracked by FactSet are for revenue of $60.9 billion, with a profit of $2.82 a share.
The company provides guidance for each of its three business segments. Microsoft projected revenue of $19.3 billion to $19.6 billion for the Productivity and Business Processes segment, which includes Office and other software. That would amount to a gain of between 10% and 12%.
For its Intelligent Cloud unit, including Azure, the company sees revenue of between $26 billion and $26.3 billion, up between 18% and 19%, and above the consensus of $25.9 billion. Azure growth is expected to come in at 28.5% in constant-currency terms, according to FactSet.
For More Personal Computing, which includes videogames, Windows, and Surface hardware, Microsoft sees revenue of between $14.7 billion and $15.1 billion, up between 11% and 14%.
For the June quarter, consensus estimates call for total revenue of $64.6 billion and profits of $2.89 a share. The Street sees revenue of $20.5 billion for Productivity and Business Processes, $28.5 billion for Intelligent Cloud, and $15.7 billion for More Personal Computing.
Citi analyst Tyler Radke, who rates the stock at Buy, said in a preview note that he is bullish about Microsoft shares, seeing signs of strength in the Azure business, boosted by AI services. Azure growth could be a percentage point or two higher than Wall Street has forecast, he said. He also reported “a more positive PC backdrop against conservative guidance.”
Likewise, Evercore ISI analyst Kirk Materne, who rates the stock at Outperform, thinks Azure’s revenue growth could potentially come in at 30% or higher, particularly given the contribution from AI. Artificial intelligence provided a six-percentage-point boost to Azure’s growth rate in the December quarter, he said.
“The risk/reward continues to skew to the upside given the ongoing momentum in Microsoft’s enterprise business and AI portfolio,” he wrote.