Technology giant Microsoft Corp MSFT will report first-quarter financial results after market close on Tuesday, Oct. 24 in a week that includes earnings from some of the biggest technology companies.
Here’s a look at the earnings estimates, what analysts were saying and key items for investors to watch.
Earnings Estimates: Analysts estimate that Microsoft will report first-quarter revenue of $54.50 billion, according to data from Benzinga Pro.
Microsoft reported revenue of $50.12 billion in the first quarter of last year. The company has beaten estimates from analysts for revenue in three of the last five quarters.
Analysts estimate Microsoft will report first-quarter earnings per share of $2.65. The company reported earnings per share of $2.35 in the first quarter of last year. The company has beaten earnings per share estimates from analysts in four of the last five quarters.
Related Link: Microsoft Q4 Earnings Highlights: Revenue And EPS Beat, Cloud Revenue Up 21%, Large AI Opportunity Ahead
What Analysts are Saying: Sentiment for Microsoft is positive thanks to its investments in artificial intelligence, according to Raymond James analyst Andrew Marok.
Marok, who has an Outperform rating and a price target of $400 on Microsoft, said Microsoft enjoyed an “enviable position” in the artificial intelligence space.
“Our conversations with investors suggest balanced sentiment; the excesses of AI optimism have moderated, and there is large alignment on expectations for lower near-term impact, building over the course of FY24 into FY25 and beyond,” Marok said.
The analyst said Microsoft was best positioned for the long-term tailwinds from the AI sector in the technology space.
The company’s cloud business was highlighted by Marok as one that saw a large impact from AI investments and growth.
“Among our conversations, AI continues to resonate as a material driver of future cloud spending that could start inflecting in 2024, as Enterprises’ AI initiatives shift from pilot into operational phases.”
Microsoft could see early share gains thanks to its Azure business and AI dominating conversations for the cloud.
“We continue to envision Microsoft as the largest beneficiary of AI, with the technology becoming pervasive across its offerings.”
Microsoft’s investments in artificial intelligence also make the stock a top pick for Citigroup analyst Tyler Radke.
Radke, who has a Buy rating, recently raised the price target on Microsoft from $420 to $430. The analyst saw revenue and profitability increasing for the company thanks to new revenue streams from artificial intelligence.
A stabilization in Microsoft’s Azure business was a call from Evercore ISI analyst Kirk Materne.
The analyst, who had an Outperform rating and price target of $400 on Microsoft, expected the company to report a solid first quarter.
Strong demand for AI services could lead to a year-over-year increase of 26% for the Azure business according to the analyst.
Check out more analyst ratings on Microsoft here.
Key Items to Watch: Artificial intelligence is likely to dominate the discussions by Microsoft executives and could be a big part of the question-and-answer segment from analysts.
Microsoft CEO Satya Nadella shared more on the future of artificial intelligence while accepting the 2023 Axel Springer Award in Berlin.
Nadella saw a large potential in artificial intelligence for Microsoft, adding that it could revolutionize the technology industry and forever change how information is consumed.
The Microsoft CEO also said the AI sector should have some level of global governance.
“The way I look at it, a little bit of competition is what will be there. But if there is going to be a successful, let’s call it a ‘regime of control’ over AI, then we will need some global cooperation like the IAEA,” Nadella said.
Nadella also shared an update on artificial intelligence in a recent shareholder letter. Nadella outlined Microsoft’s vision for a “new era of AI.”
“There are two breakthroughs coming together to define this new era of AI. The first is the most universal interface: natural language. The second is the emergence of a powerful new reasoning engine,” Nadella said in the letter.
The Microsoft CEO said over one million organizations count on Microsoft’s AI-powered solutions.
Another key topic for investors to watch will be discussions on Microsoft’s gaming division. The owner of the Xbox gaming console and several gaming studios, Microsoft recently completed its highly anticipated acquisition of Activision Blizzard.
The acquisition price of $69 billion is the largest in Microsoft history and will make the company one of the biggest players in the video game space.
“We see the deal as largely accretive right away and almost entirely incremental,” Marok said of the acquisition.
Investors and analysts will likely hope to hear how big of an impact the acquisition could have for the company in the near term.
MSFT Price Action: Microsoft shares traded at $329 on Monday morning versus a 52-week trading range of $213.46 to $366.78. Microsoft shares are up 37% year-to-date in 2023.
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