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3 Key Estimates for Microsoft's Q3 Earnings Report
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Shares of Microsoft (MSFT - Free Report) were relatively flat on Monday, just two days before what could prove to be another pivotal moment in company history. The technology behemoth is slated to announce its fiscal second-quarter earnings results on Wednesday afternoon, and investors can expect this stock to dominate headlines on the back of its all-important holiday shopping period.
Over the past several years, global demand for personal computers—and related software—has plummeted. This put Microsoft in a tricky situation; the company known for its innovative Windows operating system now needed to rebrand itself as a tech leader that could adapt to the times.
In many ways, Microsoft has done just that. For one, the company moved to a “freemium” model with Windows 10, offering the new OS as a free upgrade and focusing on the monetization of compatible apps and services.
We’ve also witnessed Microsoft’s evolution through the aggressive growth of its Azure division. Azure is Microsoft’s cloud computing platform that builds, deploys, and manages applications and web services through the company’s own network of data centers. This unit has been growing at a nearly triple-digit rate over the past year or so.
So what’s in store for Microsoft this quarter? Based on our latest consensus estimates, Microsoft is projected to report earnings of $0.86 per share and revenues of $28.35 billion. These figures would represent year-over-year growth of 3.61% and 8.77%, respectively.
Key Business Segment Estimates
But of course, earnings and revenue are just two of the many things investors will be looking at when Microsoft reports on Wednesday. In fact, it is possible that Microsoft’s post-earnings momentum is inspired by its performance in its individual business units.
To prepare for this, we can turn to our exclusive non-financial metrics consensus estimate file. The Zacks Consensus NFM file contains detailed estimate data for business segment metrics and non-financial metrics reported by companies. The data is acquired from digest and contributing broker models and includes the independent research of expert stock market analysts.
Microsoft operates under three primary business segments: Productivity & Business Processes, Intelligent Cloud, and More Personal Computing.
The Productivity & Business Processes unit includes the company’s Office, Office 365, LinkedIn, and Dynamics CRM businesses. Microsoft’s Intelligent Cloud unit contains its server and enterprise products, including Azure. The More Personal Computing segment includes Windows, Gaming, Devices, and Search businesses.
Our consensus estimate file is currently calling for Microsoft to report Productivity & Business Processes revenues of $8.877 billion, which would represent year-over-year growth of about 20.3%. Last quarter, Microsoft reported revenues of $8.238 billion in this unit, up about 23.7% year-over-year. Year-over-year comparisons will benefit from the company’s acquisition of LinkedIn, which closed in Dec. 2016.
Meanwhile, our latest consensus estimates are calling for Microsoft to report Intelligent Cloud revenues of $7.501 billion. This would represent growth of about 9.3% from the $6.861 billion witnessed in the year-ago period. In the previous quarter, Microsoft reported growth of 8.5% in this unit. We expect Azure to continue to be a key growth catalyst for the segment.
Finally, our consensus estimate for revenues in the company’s More Personal Computing unit currently sits at $12.012 billion, which would represent modest year-over-year growth of 1.60%. This segment has struggled recently, primarily due to the aforementioned slump in global PC demand. But our estimate is calling for an improvement from the 0.9% growth rate Microsoft witnessed last quarter, which could mean that the company saw a strong holiday shopping period.
Want more analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!
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3 Key Estimates for Microsoft's Q3 Earnings Report
Shares of Microsoft (MSFT - Free Report) were relatively flat on Monday, just two days before what could prove to be another pivotal moment in company history. The technology behemoth is slated to announce its fiscal second-quarter earnings results on Wednesday afternoon, and investors can expect this stock to dominate headlines on the back of its all-important holiday shopping period.
Over the past several years, global demand for personal computers—and related software—has plummeted. This put Microsoft in a tricky situation; the company known for its innovative Windows operating system now needed to rebrand itself as a tech leader that could adapt to the times.
In many ways, Microsoft has done just that. For one, the company moved to a “freemium” model with Windows 10, offering the new OS as a free upgrade and focusing on the monetization of compatible apps and services.
We’ve also witnessed Microsoft’s evolution through the aggressive growth of its Azure division. Azure is Microsoft’s cloud computing platform that builds, deploys, and manages applications and web services through the company’s own network of data centers. This unit has been growing at a nearly triple-digit rate over the past year or so.
So what’s in store for Microsoft this quarter? Based on our latest consensus estimates, Microsoft is projected to report earnings of $0.86 per share and revenues of $28.35 billion. These figures would represent year-over-year growth of 3.61% and 8.77%, respectively.
Key Business Segment Estimates
But of course, earnings and revenue are just two of the many things investors will be looking at when Microsoft reports on Wednesday. In fact, it is possible that Microsoft’s post-earnings momentum is inspired by its performance in its individual business units.
To prepare for this, we can turn to our exclusive non-financial metrics consensus estimate file. The Zacks Consensus NFM file contains detailed estimate data for business segment metrics and non-financial metrics reported by companies. The data is acquired from digest and contributing broker models and includes the independent research of expert stock market analysts.
Microsoft operates under three primary business segments: Productivity & Business Processes, Intelligent Cloud, and More Personal Computing.
The Productivity & Business Processes unit includes the company’s Office, Office 365, LinkedIn, and Dynamics CRM businesses. Microsoft’s Intelligent Cloud unit contains its server and enterprise products, including Azure. The More Personal Computing segment includes Windows, Gaming, Devices, and Search businesses.
Our consensus estimate file is currently calling for Microsoft to report Productivity & Business Processes revenues of $8.877 billion, which would represent year-over-year growth of about 20.3%. Last quarter, Microsoft reported revenues of $8.238 billion in this unit, up about 23.7% year-over-year. Year-over-year comparisons will benefit from the company’s acquisition of LinkedIn, which closed in Dec. 2016.
Meanwhile, our latest consensus estimates are calling for Microsoft to report Intelligent Cloud revenues of $7.501 billion. This would represent growth of about 9.3% from the $6.861 billion witnessed in the year-ago period. In the previous quarter, Microsoft reported growth of 8.5% in this unit. We expect Azure to continue to be a key growth catalyst for the segment.
Finally, our consensus estimate for revenues in the company’s More Personal Computing unit currently sits at $12.012 billion, which would represent modest year-over-year growth of 1.60%. This segment has struggled recently, primarily due to the aforementioned slump in global PC demand. But our estimate is calling for an improvement from the 0.9% growth rate Microsoft witnessed last quarter, which could mean that the company saw a strong holiday shopping period.
Want more analysis from this author? Make sure to follow @Ryan_McQueeney on Twitter!
Zacks Top 10 Stocks for 2018
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2018?
Last year's 2017 Zacks Top 10 Stocks portfolio produced double-digit winners, including FMC Corp. and VMware which racked up stellar gains of +67.9% and +61%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2018 today >>