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Strength in Intelligent Cloud and Productivity and Business Processes, driven by growth in Azure, Office 365 suite and other cloud services, is expected to have aided top-line growth in the to-be-reported quarter.
Teams, Microsoft's enterprise communication platform, has been a key growth driver, expanding its customer base and features to gain market share against competitors like Zoom. The platform's user growth is expected to have been driven by the hybrid/flexible work model's increasing popularity.
The steady adoption of the MSFT’s productivity and collaboration tools and services is expected to have aided top-line growth in third-quarter 2024. MSFT anticipates its Productivity and Business Processes segment to generate revenues between $19.3 billion and $19.6 billion. Our model estimate is pegged at $19.58 billion, indicating an increase of 11.8% year over year.
This Zacks Rank #3 (Hold) company expects Office 365 Commercial revenue growth to be roughly 15% at constant currency (cc), which is in line with our model estimate. However, Office Commercial products revenues are expected to decline in the low 20s. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
For Office Consumer products and cloud services, Microsoft expects revenue growth in the mid-to-high single digits, while LinkedIn is anticipated to see revenue growth in the same range.
The strong adoption of Dynamics 365, MSFT's enterprise resource planning and customer relationship management platform, is also expected to have driven top-line growth. The company expects revenue growth in the mid-teens for Dynamics. Our model estimate for Dynamics 365 is pegged at revenue growth of 15.5%.
In the to-be-reported quarter, the company added new copilot features in Microsoft Dynamics 365 Customer Insights and launched Retail Media Creative Studio in the Retail Media Platform, Microsoft Cloud for Retail, which now offers more options for retailers to choose from to infuse copilot experiences throughout the shopper journey.
MSFT and OpenAI's shared commitment to building trustworthy and safe generative AI systems and products is a significant development in the AI space.
On Mar 31, Microsoft announced a collaboration with OpenAI for an ambitious data center project, potentially costing up to $100 billion, which involves an AI supercomputer.
Overall, MSFT's productivity and collaboration offerings are expected to have driven strong growth in the fiscal third quarter, positioning the company well in the competitive market.
Revenues from Windows are likely to have been driven by steady traction seen in Windows Commercial products and cloud services growth amid improving personal computer (PC) demand.
After two years of decline, the worldwide traditional PC market returned to growth during the first quarter of 2024, with 59.8 million shipments, growing 1.5% year over year, according to preliminary results from the International Data Corporation Worldwide Quarterly Personal Computing Device Tracker.
Among major PC vendors, Lenovo (LNVGY - Free Report) and Hewlett Packard (HPE - Free Report) registered an increase in shipments. Lenovo's shipments increased 7.8% year over year to 13.7 million units, while HPE's shipments grew 0.2% year over year to 12 million units. Additionally, Apple (AAPL - Free Report) registered a 14.6% year-over-year improvement in shipments, reaching 4.8 million units.
Shares of MSFT have returned 6.1% year to date compared with the broader Zacks Computer & Technology sector’s growth of 3.2%. Shares of LNVGY, HPE and AAPL have lost 25.2%, 1.1% and 14.3%, respectively.
For the More Personal Computing segment, the company projects revenues between $14.7 billion and $15.1 billion. Microsoft expects Windows OEM revenues to grow in the mid to high-single-digit range. Our model estimate for this segment is pegged at $14.92 billion, indicating growth of 12.6% from the figure reported in the year-ago quarter.
In the Gaming segment, MSFT expects revenue growth in the mid to high 40s, including roughly 35 points of net impact from the Activision acquisition. Furthermore, Microsoft anticipates Xbox content and services revenue growth in the mid to high 50s, driven by roughly 50 points of net impact from the Activision acquisition.
Fiscal Q3 2024 Projections Hint at Diverse Outcomes
The Zacks Consensus Estimate for revenues is pegged at $60.63 billion, indicating growth of 14.71% from the figure reported in the year-ago quarter.
The consensus mark for earnings has moved south by 1.1% to $2.81 per share over the past 30 days, suggesting 18.97% year-over-year growth.
Microsoft’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 8.82%.
For the Intelligent Cloud segment, the company anticipates revenues between $26 billion and $26.3 billion. Our model estimate for this segment is pegged at $26.01 billion, indicating growth of 17.8% from the figure reported in the year-ago quarter. In Azure, Microsoft expects revenue growth in the range of 26-27% at cc.
Image: Bigstock
Assessing Your Microsoft (MSFT) Stake Ahead of Q3 Earnings
Microsoft (MSFT - Free Report) is set to report third-quarter fiscal 2024 results on Apr 25.
Strength in Intelligent Cloud and Productivity and Business Processes, driven by growth in Azure, Office 365 suite and other cloud services, is expected to have aided top-line growth in the to-be-reported quarter.
Teams, Microsoft's enterprise communication platform, has been a key growth driver, expanding its customer base and features to gain market share against competitors like Zoom. The platform's user growth is expected to have been driven by the hybrid/flexible work model's increasing popularity.
The steady adoption of the MSFT’s productivity and collaboration tools and services is expected to have aided top-line growth in third-quarter 2024. MSFT anticipates its Productivity and Business Processes segment to generate revenues between $19.3 billion and $19.6 billion. Our model estimate is pegged at $19.58 billion, indicating an increase of 11.8% year over year.
This Zacks Rank #3 (Hold) company expects Office 365 Commercial revenue growth to be roughly 15% at constant currency (cc), which is in line with our model estimate. However, Office Commercial products revenues are expected to decline in the low 20s. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
For Office Consumer products and cloud services, Microsoft expects revenue growth in the mid-to-high single digits, while LinkedIn is anticipated to see revenue growth in the same range.
The strong adoption of Dynamics 365, MSFT's enterprise resource planning and customer relationship management platform, is also expected to have driven top-line growth. The company expects revenue growth in the mid-teens for Dynamics. Our model estimate for Dynamics 365 is pegged at revenue growth of 15.5%.
In the to-be-reported quarter, the company added new copilot features in Microsoft Dynamics 365 Customer Insights and launched Retail Media Creative Studio in the Retail Media Platform, Microsoft Cloud for Retail, which now offers more options for retailers to choose from to infuse copilot experiences throughout the shopper journey.
MSFT and OpenAI's shared commitment to building trustworthy and safe generative AI systems and products is a significant development in the AI space.
On Mar 31, Microsoft announced a collaboration with OpenAI for an ambitious data center project, potentially costing up to $100 billion, which involves an AI supercomputer.
Overall, MSFT's productivity and collaboration offerings are expected to have driven strong growth in the fiscal third quarter, positioning the company well in the competitive market.
Microsoft Corporation Price and EPS Surprise
Microsoft Corporation price-eps-surprise | Microsoft Corporation Quote
Silver Linings Appear in Dwindling PC Landscape
Revenues from Windows are likely to have been driven by steady traction seen in Windows Commercial products and cloud services growth amid improving personal computer (PC) demand.
After two years of decline, the worldwide traditional PC market returned to growth during the first quarter of 2024, with 59.8 million shipments, growing 1.5% year over year, according to preliminary results from the International Data Corporation Worldwide Quarterly Personal Computing Device Tracker.
Among major PC vendors, Lenovo (LNVGY - Free Report) and Hewlett Packard (HPE - Free Report) registered an increase in shipments. Lenovo's shipments increased 7.8% year over year to 13.7 million units, while HPE's shipments grew 0.2% year over year to 12 million units. Additionally, Apple (AAPL - Free Report) registered a 14.6% year-over-year improvement in shipments, reaching 4.8 million units.
Shares of MSFT have returned 6.1% year to date compared with the broader Zacks Computer & Technology sector’s growth of 3.2%. Shares of LNVGY, HPE and AAPL have lost 25.2%, 1.1% and 14.3%, respectively.
For the More Personal Computing segment, the company projects revenues between $14.7 billion and $15.1 billion. Microsoft expects Windows OEM revenues to grow in the mid to high-single-digit range. Our model estimate for this segment is pegged at $14.92 billion, indicating growth of 12.6% from the figure reported in the year-ago quarter.
In the Gaming segment, MSFT expects revenue growth in the mid to high 40s, including roughly 35 points of net impact from the Activision acquisition. Furthermore, Microsoft anticipates Xbox content and services revenue growth in the mid to high 50s, driven by roughly 50 points of net impact from the Activision acquisition.
Fiscal Q3 2024 Projections Hint at Diverse Outcomes
The Zacks Consensus Estimate for revenues is pegged at $60.63 billion, indicating growth of 14.71% from the figure reported in the year-ago quarter.
The consensus mark for earnings has moved south by 1.1% to $2.81 per share over the past 30 days, suggesting 18.97% year-over-year growth.
Microsoft’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 8.82%.
For the Intelligent Cloud segment, the company anticipates revenues between $26 billion and $26.3 billion. Our model estimate for this segment is pegged at $26.01 billion, indicating growth of 17.8% from the figure reported in the year-ago quarter. In Azure, Microsoft expects revenue growth in the range of 26-27% at cc.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.