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Microsoft (MSFT) Earnings Preview: Cloud, Personal Computing & More

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Microsoft (MSFT - Free Report) stock has surged over 14% since Christmas as part of the larger market resurgence. In order for the tech powerhouse to continue its run, it will likely have to impress investors with solid fiscal second quarter 2019 financial results.

So, let’s see what we should expect from Microsoft’s top and bottom line, as well as some of its specific business units, including Intelligent Cloud, before the company reports its earnings results on Wednesday, January 30.

Quick Overview

Microsoft, Apple (AAPL - Free Report) , Amazon (AMZN - Free Report) and Google parent Alphabet (GOOGL - Free Report) continue to fight for the title of the world’s most valuable company. Still, no matter how fun this back and forth race for market cap supremacy might be, investors really care that MSFT has been able to grow its core businesses, while also expanding its reach in the new digital age.

For starters, Microsoft grabbed roughly 15% of the cloud market last quarter to top IBM (IBM - Free Report) , Google, and Alibaba (BABA - Free Report) and come in second to Amazon. We should also note that the company’s gaming business has expanded recently. Plus, CEO Satya Nadella and Microsoft made 15 acquisitions last year, highlighted by its $7.5 billion purchase of open-sourced software platform Github, which should help the company continue to expand into new growth areas.

Outlook

Microsoft’s second-quarter revenues are projected to climb 12.2% to hit $32.45 billion, based on our current Zacks Consensus Estimate. Last quarter, MSFT’s revenues surged by 19% to reach $29.1 billion. Meanwhile, the tech company’s adjusted quarterly earnings are expected to surge 13.5% to reach $1.09 per share.

Now we need to understand what to expect from Microsoft’s individual business units as they could determine how MSFT stock trades, especially in the near-term. To understand what to expect from these vital units 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.

Productivity & Business Processes

Microsoft’s Productivity & Business Processes unit features the firm’s Office, LinkedIn, and Dynamics CRM businesses. The company is projected to see its revenues jump 12.8% from $8.953 billion to reach $10.096 billion, based on our current NFM consensus estimates.

Last quarter, Productivity & Business Processes revenues surged 19%, while unit revenues climbed 25% in the year-ago period. So clearly the firm’s fiscal second-quarter revenues would mark a slowdown compared to recent periods.

Intelligent Cloud

Moving on, Microsoft’s Intelligent Cloud is projected to surge over 19% from $7.795 billion to hit $9.295 billion. We should note that Intelligent Cloud has become one of MSFT’s most important units and is comprised of the company’s server and enterprise products. This segment also includes its much talked about Azure unit.

With that said, Intelligent Cloud climbed 24% last quarter and popped 15% in the year-ago period.

More Personal Computing

We close with a look at what is still Microsoft’s largest business segment, More Personal Computing. The division that features Microsoft Windows, Devices, Gaming, and Search is projected to see its revenues reach $13.086 billion. This would mark a roughly 7.5% climb from the prior-year quarter’s $12.170 billion, which itself was up only 2%.

Clearly, our estimate represents solid growth compared to Q2 2018, but it would mark a sequential slowdown compared to Q1’s 15% expansion. This growth was driven by its Xbox-fueled gaming segment, which soared 44% as its Netflix (NFLX - Free Report) -style Xbox Game Pass grew in popularity.

Microsoft is currently scheduled to report its Q2 fiscal 2019 earnings results after the closing bell on Wednesday, January 30. Make sure to check back here for our full analysis of Microsoft’s actual financial results after the company reports.

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