We’re now less than a week away from Microsoft’s March quarter earnings report, and the Street is getting jazzed about an extension of the company’s recent string of better-than-expected earnings reports.
Analysts project revenue of $41 billion, up 17%, with profits of $1.77 a share. Microsoft (ticker: MSFT) does not provide aggregate earnings guidance, but in reporting results for the December quarter, Chief Financial Officer Amy Hood as per usual provided revenue guidance for each of the company’s three business segments. For Productivity and Business Processes, the company sees revenue of $13.35 billion to $13.6 billion; for Intelligent Cloud, $14.7 billion to $14.95 billion; and for “More Personal Computing,” $12.3 billion to $12.7 billion. At the top of the range for each, overall revenue would be $41.25 billion.
Microsoft stock has gained almost 17% year to date, and sits just a few dollars below a record high. The company has benefitted in the pandemic from both growing enterprise adoption of cloud computing and a surprisingly robust market for personal computers, and those trends should be evident when the company reports next Tuesday.
Citi analyst Tyler Radke on Wednesday reiterated his Buy rating on Microsoft stock, lifting his price target to $302 from $292, and setting a “positive catalyst watch” on the stock ahead of fiscal-third-quarter earnings. Radke writes in a research note that a survey of resellers and channel checks make him more confident that Microsoft can drive revenue across all three primary business segments, with strength in PC demand from both consumers and businesses, robust upgrade activity on server software and continued strength in Azure “driven by continued strong enterprise consumption growth.”
And he sees the strength in server and Azure to be sustainable beyond the third quarter, providing “a good set up” for both the fiscal fourth quarter and into the June 2022 fiscal year.
Concludes Radkle: “We continue to see Microsoft as the best-positioned mega-cap in software as we see double-digit growth (revenue and profits) at scale as sustainable.”
Evercore ISI analyst Kirk Materne likewise is bullish on the quarter; he repeats his Outperform rating and $300 target. Materne expects “another strong report” driven in particular by strength in Azure and Office 365.
Materne thinks the quarter will offer “another validation of why Microsoft remains a core holding for software investors,” with durable revenue and profit growth and a fortress balance sheet. He adds that when you consider the strong macroeconomic backdrop, there is potential for June quarter results to top estimates.
Cowen analyst J. Derrick Wood, who has an Outperform rating and $280 target price on Microsoft shares, writes in a research note that there is a possibility that Azure decelerated modestly in the March quarter, but he nonetheless expects the company to post upside to consensus estimates, and sees re-acceleration in the June quarter on easier year-over-year comparisons.
“We think shares strike a good balance of growth and value and remain constructive on the company’s momentum in gaining cloud market share,” Wood writes. “Microsoft’s hybrid cloud approach is well-positioned to benefit not only from continued Covid-19 related tailwinds, but also from employees returning to office and digital-transformation budgets returning to pre-pandemic levels.”
On Wednesday, Microsoft stock is up 0.8% to $260.27.
Write to Eric J. Savitz at email@example.com