Microsoft Q3 Earnings Preview: All Eyes Are On AI-Driven Growth

Microsoft Corp. MSFT will announce fiscal year 2023 third-quarter financial results on Tuesday, April 25, after market close. Here are five things to know ahead of the report:

• The company's earnings per share for the quarter are expected to be $2.24, with revenue of $51.11 billion, according to Wall Street analysts.
• Earnings are expected to fall 3.5% in Q2 2023 and to remain basically steady from Q3 2022.
• Estimated sales are down 3.2% from Q2 2023 and up 3.5% from Q3 2023.
  In the last four quarters, the firm has outperformed profit estimates three times and revenue predictions twice.
• It will be Microsoft's first financial report after the company decided to invest $10 billion in OpenAI, the artificial intelligence (AI) startup powering ChatGPT, in January 2023.

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Analysts' Views on Microsoft's Earnings

Analysts at BofA expect Microsoft to announce some revenue shortfall compared to Street projections owing to decline in PC sales, although they see this as a transitory macro headwind. Overall, BofA sees Microsoft as one of the few companies possessing the three critical components necessary for AI success:

1. computational scale (through Azure & Office 365)
2. data scale (cloud infrastructure & desktop apps) and
3. data management/engineering skills (SQL, Synapse, Sentinel, and so on).

This month, BofA raised its Microsoft's price objective from $300 to $320 on the back of emerging AI-driven growth.

Microsoft's Stock Performance And Valuations

• Microsoft's stock price is trading at $285 per share, up 19% year to date as of this writing. 
• Shares are nearly 18% lower than their all-time highs of $349 set in November 2021. 
• Last quarter, the Redmond, Washington-based company gained 17.5% posting its second-best quarterly performance over the past five years.
• The current Microsoft's stock price is 7% below the average price target from a pool of Wall Street analysts covering the company. 
• Microsoft trades at a forward price-to-earnings ratio of 28.9, according to Benzinga pro data. 

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