Microsoft Q4 Earnings Preview: Azure Key To Growth

Microsoft Corporation MSFT is poised to report strong fourth-earnings Wednesday, according to tech analysts.

Wedbush’s Daniel Ives maintained an Outperform rating on Microsoft with a $260 price target, while Jefferies’ Brent Thill maintained a Buy rating and raised the price target from $200 to $240.

Azure Key To Microsoft’s Results: During the June quarter, there was “robust cloud deal activity” around Microsoft’s Azure, Ives said in a Monday note.

The work from home environment created by COVID-19 is “is further catalyzing more enterprises to make the strategic cloud shift with Microsoft across the board,” the analyst said.

Some firms are accelerating their partnerships with Microsoft by six to 12 months, he said. 

“Azure’s cloud momentum is still in its early days,” and Microsoft “is the core cloud name” in the trend of cloud deployments, Ives said. 

The number of workloads in the cloud could rise from 33% today to 55% by 2022, the analyst said, with work-from-home potentially accelerating the trend by a year. 

Microsoft could be a major beneficiary, he said. 

Aside from Azure, the Office 365 transition in the consumer and enterprise segments is providing additional growth tailwinds for Microsoft, according to Wedbush. 

Microsoft “is one of the best pillars in software,” Thill said in a Sunday note.

Microsoft will deliver strong fourth-quarter results and Azure will “continue to perform strongly,” the analyst said. 

Jefferies also noted the increased cloud computing shift, and Thill said video games and Microsoft Office are two other potential strength areas.

The analyst named three potential pitfalls for Redmond: 

• High expectations. Microsoft stock has “moved 13% since the day following its last earnings report and is now up close to 29% YTD vs the IGV’s 23%,” he said. 
• Risk to the on-premise service business. Guidance and Azure “could mitigate this,” Thill said.
• Potential noise in coronavirus-impacted segments. They include Search, Dynamics and LinkedIn. 

Microsoft shares were down 1.35% at $208.75 at the close Tuesday.