- Credit Suisse expects Microsoft Corp MSFT Azure, as the “enterprise cloud,” to disproportionately benefit from this accelerated shift to the public cloud.
- It saw Azure continue to narrow the revenue gap to Amazon.com Inc AMZN Amazon Web Services (AWS), and widen the gap to Alphabet Inc GOOG GOOGL Google Cloud. All of which will drive sustained growth for Microsoft and meaningful upside to consensus estimates.
- Credit Suisse noted that Azure has grown meaningfully faster than AWS when achieving revenue run-rate milestones and continued to grow faster after reaching these benchmarks than AWS. The revenue run-rate milestones included ~$500 million, ~$1.0 billion, ~$1.5 billion, ~$2.5 billion, ~$3.25 billion, ~$4.0 billion, ~$5.0 billion, and ~$7.5 billion.
- Azure has grown and continues to grow faster than both Google Cloud and Alibaba Group Holding Limited BABA Alibaba Cloud when achieving similar revenue scale milestones.
- For at least the next five years, Credit Suisse forecast Microsoft to deliver mid-to-high teens revenue growth driven by mid-20% growth in Intelligent Cloud, mid-teens growth in Productivity and Business Processes, and ~2-5% growth in Windows.
- Credit Suisse also forecasts high-teens to +20% EPS and FCFPS growth driven by scale (even with accelerating investments) and ongoing share repurchases.
- Credit Suisse believes these sustained growth and profitability levels were still not adequately reflected in consensus estimates or valuation.
- Price Action: MSFT shares traded lower by 3.08% at $244.01 on the last check Thursday.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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