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Microsoft's (MSFT) Q3 Earnings to Benefit from Azure Growth
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Microsoft Corp (MSFT - Free Report) is set to report third-quarter fiscal 2018 results on Apr 26.
The company’s cloud computing service — Azure — has been the key catalyst in recent times. In the last quarter, Azure revenues soared 98% at constant currency on a year-over-year basis. Moreover, Azure premium revenues grew triple digits for the 14th consecutive quarter.
Adoption remains strong as evident from growing customer base. Azure has been selected by the likes of United Technologies and Columbia Sportswear. Data center expansion also continues with Azure now in 42 regions globally, more than any other cloud provider.
Further, the acquisitions of PlayFab and Avere Systems are likely to strengthen Azure’s enterprise-strength capabilities. According to data from Synergy Research, Azure gained market share at a much faster rate compared with Amazon Web Service and Alphabet’s (GOOGL - Free Report) Google.
For the third quarter, Microsoft expects Intelligent Cloud revenues (Azure falls under this segment) between $7.55 billion and $7.75 billion. The company anticipates another quarter of double-digit revenue growth across server products and cloud services.
Hence, a strong customer commitment to Azure is expected to drive cloud revenues further, keeping Microsoft unbeatable in this high return segment.
The Zacks Consensus Estimate for revenues for the Intelligent Cloud segment is currently pegged at $7.70 billion, higher than $6.76 billion reported in the year-ago quarter.
Robust Office 365 Adoption, LinkedIn Growth Other Drivers
Office 365 is a subscription plan to access Office applications and other productivity services utilized in cloud services. Microsoft is striving to catch up with Alphabet’s G-Suite by empowering Office 365.
The launch of a plethora of products — Microsoft Teams in Office 365 for Education, Microsoft 365, Microsoft Relationship Sales solution and ISV Cloud Embed — is anticipated to drive installed base. Moreover, the company continues to add features to Windows 10 that makes it more attractive for consumers as well as enterprises.
LinkedIn is also growing much faster than previously anticipated. As LinkedIn becomes more integrated into the Microsoft, it is expected to push overall top-line growth above 10% (when combined with Azure/O365).
The Zacks Consensus Estimate for revenues for the Productivity and Business Processes segment is currently pegged at $8.76 billion, higher than $7.96 reported in the year-ago quarter.
Positive Earnings Surprise History
Notably, Microsoft has a positive record of earnings surprises in the trailing four quarters, with an average surprise of 18.03%. Last quarter, the company delivered a positive earnings surprise of 11.63%.
Microsoft has also beaten the Zacks Consensus Estimate for revenues in the last four trailing quarters. In the last quarter, revenues of $28.92 billion increased almost 12% from the year-ago quarter (up 11% in constant currency). Further, the figure marginally exceeded the Zacks Consensus Estimate of $28.35 billion.
The Zacks Consensus Estimate for third-quarter fiscal 2018 earnings and revenues are currently pegged at 85 cents and $25.71 billion, respectively.
What Our Model Says
According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.
Microsoft has a Zacks Rank #3 and an Earnings ESP of +1.22%, which indicates a likely positive surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Other Stocks to Consider
Here are few stocks you may consider as our proven model shows that these too have the right combination of elements to post an earnings beat this quarter.
Paycom Software (PAYC - Free Report) has an Earnings ESP of +0.33% and a Zacks Rank #1.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
Image: Bigstock
Microsoft's (MSFT) Q3 Earnings to Benefit from Azure Growth
Microsoft Corp (MSFT - Free Report) is set to report third-quarter fiscal 2018 results on Apr 26.
The company’s cloud computing service — Azure — has been the key catalyst in recent times. In the last quarter, Azure revenues soared 98% at constant currency on a year-over-year basis. Moreover, Azure premium revenues grew triple digits for the 14th consecutive quarter.
Adoption remains strong as evident from growing customer base. Azure has been selected by the likes of United Technologies and Columbia Sportswear. Data center expansion also continues with Azure now in 42 regions globally, more than any other cloud provider.
Further, the acquisitions of PlayFab and Avere Systems are likely to strengthen Azure’s enterprise-strength capabilities. According to data from Synergy Research, Azure gained market share at a much faster rate compared with Amazon Web Service and Alphabet’s (GOOGL - Free Report) Google.
For the third quarter, Microsoft expects Intelligent Cloud revenues (Azure falls under this segment) between $7.55 billion and $7.75 billion. The company anticipates another quarter of double-digit revenue growth across server products and cloud services.
Microsoft Corporation Price and EPS Surprise
Microsoft Corporation Price and EPS Surprise | Microsoft Corporation Quote
Hence, a strong customer commitment to Azure is expected to drive cloud revenues further, keeping Microsoft unbeatable in this high return segment.
The Zacks Consensus Estimate for revenues for the Intelligent Cloud segment is currently pegged at $7.70 billion, higher than $6.76 billion reported in the year-ago quarter.
Robust Office 365 Adoption, LinkedIn Growth Other Drivers
Office 365 is a subscription plan to access Office applications and other productivity services utilized in cloud services. Microsoft is striving to catch up with Alphabet’s G-Suite by empowering Office 365.
The launch of a plethora of products — Microsoft Teams in Office 365 for Education, Microsoft 365, Microsoft Relationship Sales solution and ISV Cloud Embed — is anticipated to drive installed base. Moreover, the company continues to add features to Windows 10 that makes it more attractive for consumers as well as enterprises.
LinkedIn is also growing much faster than previously anticipated. As LinkedIn becomes more integrated into the Microsoft, it is expected to push overall top-line growth above 10% (when combined with Azure/O365).
The Zacks Consensus Estimate for revenues for the Productivity and Business Processes segment is currently pegged at $8.76 billion, higher than $7.96 reported in the year-ago quarter.
Positive Earnings Surprise History
Notably, Microsoft has a positive record of earnings surprises in the trailing four quarters, with an average surprise of 18.03%. Last quarter, the company delivered a positive earnings surprise of 11.63%.
Microsoft has also beaten the Zacks Consensus Estimate for revenues in the last four trailing quarters. In the last quarter, revenues of $28.92 billion increased almost 12% from the year-ago quarter (up 11% in constant currency). Further, the figure marginally exceeded the Zacks Consensus Estimate of $28.35 billion.
The Zacks Consensus Estimate for third-quarter fiscal 2018 earnings and revenues are currently pegged at 85 cents and $25.71 billion, respectively.
What Our Model Says
According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. The Sell-rated stocks (Zacks Rank #4 or 5) are best avoided.
Microsoft has a Zacks Rank #3 and an Earnings ESP of +1.22%, which indicates a likely positive surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Other Stocks to Consider
Here are few stocks you may consider as our proven model shows that these too have the right combination of elements to post an earnings beat this quarter.
Western Digital (WDC - Free Report) has an Earnings ESP of +2.30% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Paycom Software (PAYC - Free Report) has an Earnings ESP of +0.33% and a Zacks Rank #1.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
See This Ticker Free >>