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Microsoft (MSFT) to Post Q4 Earnings: Azure & Teams in Focus
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Microsoft (MSFT - Free Report) is slated to report fourth-quarter fiscal 2021 results on Jul 27.
The company has been focused on enhancing the capabilities of its cloud platform — Azure, which is expected to have boosted its adoption in the to-be-reported quarter. Azure has been benefiting from the pandemic-led digital transformation across the globe.
Azure’s increased availability in more than 60 announced regions worldwide is anticipated to have bolstered its cloud business and strengthened its competitive position against Amazon’s (AMZN - Free Report) Amazon Web Services and Alphabet’s (GOOGL - Free Report) Google cloud.
Steady traction in Azure Syapse, the Azure Communications Services platform, Azure Kubernetes Services and Azure Cognitive offerings are anticipated to have acted as a tailwind.
Azure revenues rose 46% at constant currency on a year-over-year basis in the last reported quarter.
For the fiscal fourth quarter, Microsoft expects Intelligent Cloud revenues (Azure falls under the segment) between $16.2 billion and $16.45 billion. Azure's revenue growth is expected to reflect continued strength in consumption-based services.
The Zacks Consensus Estimate for the Intelligent Cloud segment revenues is currently pegged at $16.4 billion, indicating growth of 22.5% from the year-ago quarter.
Click here to know how the company’s overall fiscal fourth-quarter performance is expected to have been.
Teams Adoption Expected to Be Strong
Microsoft’s Teams app is expected to have witnessed healthy uptake due to the continuation of the work-from-home setup globally. The gradual implementation of the hybrid work model is expected to have further boosted the adoption of the video conferencing app.
The tech giant continues to add features to the app to make it more attractive to enterprise customers. In the fiscal third quarter, the company noted that it added nearly 300 features in the past year. At the end of the last reported quarter, Microsoft’s Teams app had 145 million daily active users.
Increasing competition from the likes of Zoom Video (ZM - Free Report) , and Webex in the video conferencing domain is expected to have acted as a headwind.
Microsoft Power Platform is likely to have positively impacted the top-line performance in the quarter to be reported. The Power platform, the company’s next-generation business process automation platform, boasts a strong user base of 16 million.
The company has been integrating machine learning (ML) and artificial intelligence (AI) capabilities in its Microsoft 365 offerings to augment productivity, which is expected to have driven its adoption rate.
Microsoft 365 consumer subscribers in the fiscal third quarter soared 27% to 50.2 million from 47.5 million reported in the prior quarter. We expect the momentum in subscribers to have continued in the to-be-reported quarter, backed by digital transformation in the industry on the coronavirus crisis-led work-from-home wave.
Incremental gains from the Microsoft 365 suite adoption are expected to have boosted growth in the per-user business. The company noted that it was expecting some moderation in growth, given the large size of the installed base.
Strong upsell opportunity for Microsoft E5 and momentum in Office 365 are expected to have driven growth in Office commercial.
The LinkedIn business is expected to have gained from improving job and advertising market scenarios. Microsoft expects LinkedIn revenues to be in the mid-30%, while revenues from the Dynamics products and cloud services business are expected to be at the similar levels seen in the fiscal third quarter of 2021, driven by the continued Dynamics 365 momentum.
In the fiscal third quarter, Dynamics products and cloud services business improved 26% (up 22% at cc), whereas Dynamics 365 revenues rose 45% (40% at cc).
For the fiscal fourth quarter, Microsoft expects Productivity and Business Processes revenues between $13.8 billion and $14.05 billion, backed by the continued Dynamics 365 momentum and growth in LinkedIn.
The Zacks Consensus Estimate for revenues for the Productivity and Business Processes segment is currently pegged at $13.9 billion, indicating a year-over-year improvement of 18.5%.
However, the software giant expects on-premises business to decline in the high-teens due to customers’ shift to cloud.
A Look at Personal Computing Segment
Microsoft expects More Personal Computing revenues (comprising Windows, Gaming, Devices and Search businesses) between $13.6 billion and $14 billion. The Zacks Consensus Estimate for revenues for the More Personal Computing segment is currently pegged at $13.8 billion, indicating growth of 6.7% on a year-over-year basis.
Steady traction in PC shipments in the second quarter of calendar year 2021, driven by increased consumer demand on remote-work and online-learning trends, is likely to have contributed to the company’s More Personal Computing segmental performance in the fiscal fourth quarter. Per IDC’s preliminary data, PC shipments in second quarter of calendar 2021 improved 13.2% year over year to 83.6 million units.
The tech giant expects gaming revenues to be up in mid to high-single digits year over year. Increases in Xbox Live monthly active users and the adoption of Game Pass subscriptions on higher engagement levels are likely to have positively impacted the gaming business.
Microsoft noted that Xbox content and services revenues are expected to decline in the mid to high-single-digit range, owing to tougher year-over-year comparisons in the fiscal fourth quarter. Meanwhile, the demand for Xbox Series X and S is expected to be negatively impacted by supply issues.
Revenues from Surface devices in the to-be-reported quarter are likely to have been negatively impacted by the tough year-over-year comparisons and are anticipated to decline in the mid-teens range on a year-over-year basis, added the tech giant.
Windows commercial products and cloud services business is likely to have been driven by the momentum in Microsoft 365 and advanced security solutions. The company expects overall Windows revenues to grow in the mid-single-digit range.
The company anticipates search advertising revenues, excluding traffic acquisition costs to grow in the mid-40% on the recovering advertising market.
Image: Bigstock
Microsoft (MSFT) to Post Q4 Earnings: Azure & Teams in Focus
Microsoft (MSFT - Free Report) is slated to report fourth-quarter fiscal 2021 results on Jul 27.
The company has been focused on enhancing the capabilities of its cloud platform — Azure, which is expected to have boosted its adoption in the to-be-reported quarter. Azure has been benefiting from the pandemic-led digital transformation across the globe.
Azure’s increased availability in more than 60 announced regions worldwide is anticipated to have bolstered its cloud business and strengthened its competitive position against Amazon’s (AMZN - Free Report) Amazon Web Services and Alphabet’s (GOOGL - Free Report) Google cloud.
Steady traction in Azure Syapse, the Azure Communications Services platform, Azure Kubernetes Services and Azure Cognitive offerings are anticipated to have acted as a tailwind.
Microsoft Corporation Revenue (Quarterly)
Microsoft Corporation revenue-quarterly | Microsoft Corporation Quote
Azure revenues rose 46% at constant currency on a year-over-year basis in the last reported quarter.
For the fiscal fourth quarter, Microsoft expects Intelligent Cloud revenues (Azure falls under the segment) between $16.2 billion and $16.45 billion. Azure's revenue growth is expected to reflect continued strength in consumption-based services.
The Zacks Consensus Estimate for the Intelligent Cloud segment revenues is currently pegged at $16.4 billion, indicating growth of 22.5% from the year-ago quarter.
Click here to know how the company’s overall fiscal fourth-quarter performance is expected to have been.
Teams Adoption Expected to Be Strong
Microsoft’s Teams app is expected to have witnessed healthy uptake due to the continuation of the work-from-home setup globally. The gradual implementation of the hybrid work model is expected to have further boosted the adoption of the video conferencing app.
The tech giant continues to add features to the app to make it more attractive to enterprise customers. In the fiscal third quarter, the company noted that it added nearly 300 features in the past year. At the end of the last reported quarter, Microsoft’s Teams app had 145 million daily active users.
Increasing competition from the likes of Zoom Video (ZM - Free Report) , and Webex in the video conferencing domain is expected to have acted as a headwind.
Microsoft Power Platform is likely to have positively impacted the top-line performance in the quarter to be reported. The Power platform, the company’s next-generation business process automation platform, boasts a strong user base of 16 million.
The company has been integrating machine learning (ML) and artificial intelligence (AI) capabilities in its Microsoft 365 offerings to augment productivity, which is expected to have driven its adoption rate.
Microsoft 365 consumer subscribers in the fiscal third quarter soared 27% to 50.2 million from 47.5 million reported in the prior quarter. We expect the momentum in subscribers to have continued in the to-be-reported quarter, backed by digital transformation in the industry on the coronavirus crisis-led work-from-home wave.
Incremental gains from the Microsoft 365 suite adoption are expected to have boosted growth in the per-user business. The company noted that it was expecting some moderation in growth, given the large size of the installed base.
Strong upsell opportunity for Microsoft E5 and momentum in Office 365 are expected to have driven growth in Office commercial.
The LinkedIn business is expected to have gained from improving job and advertising market scenarios. Microsoft expects LinkedIn revenues to be in the mid-30%, while revenues from the Dynamics products and cloud services business are expected to be at the similar levels seen in the fiscal third quarter of 2021, driven by the continued Dynamics 365 momentum.
In the fiscal third quarter, Dynamics products and cloud services business improved 26% (up 22% at cc), whereas Dynamics 365 revenues rose 45% (40% at cc).
For the fiscal fourth quarter, Microsoft expects Productivity and Business Processes revenues between $13.8 billion and $14.05 billion, backed by the continued Dynamics 365 momentum and growth in LinkedIn.
The Zacks Consensus Estimate for revenues for the Productivity and Business Processes segment is currently pegged at $13.9 billion, indicating a year-over-year improvement of 18.5%.
However, the software giant expects on-premises business to decline in the high-teens due to customers’ shift to cloud.
A Look at Personal Computing Segment
Microsoft expects More Personal Computing revenues (comprising Windows, Gaming, Devices and Search businesses) between $13.6 billion and $14 billion. The Zacks Consensus Estimate for revenues for the More Personal Computing segment is currently pegged at $13.8 billion, indicating growth of 6.7% on a year-over-year basis.
Steady traction in PC shipments in the second quarter of calendar year 2021, driven by increased consumer demand on remote-work and online-learning trends, is likely to have contributed to the company’s More Personal Computing segmental performance in the fiscal fourth quarter. Per IDC’s preliminary data, PC shipments in second quarter of calendar 2021 improved 13.2% year over year to 83.6 million units.
The tech giant expects gaming revenues to be up in mid to high-single digits year over year. Increases in Xbox Live monthly active users and the adoption of Game Pass subscriptions on higher engagement levels are likely to have positively impacted the gaming business.
Microsoft noted that Xbox content and services revenues are expected to decline in the mid to high-single-digit range, owing to tougher year-over-year comparisons in the fiscal fourth quarter. Meanwhile, the demand for Xbox Series X and S is expected to be negatively impacted by supply issues.
Revenues from Surface devices in the to-be-reported quarter are likely to have been negatively impacted by the tough year-over-year comparisons and are anticipated to decline in the mid-teens range on a year-over-year basis, added the tech giant.
Windows commercial products and cloud services business is likely to have been driven by the momentum in Microsoft 365 and advanced security solutions. The company expects overall Windows revenues to grow in the mid-single-digit range.
The company anticipates search advertising revenues, excluding traffic acquisition costs to grow in the mid-40% on the recovering advertising market.
Microsoft currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.