Microsoft Corp (NASDAQ: MSFT) has confirmed the date for its quarterly earnings release, which will be on Tuesday, January 25, 2022, after market close.
What to look for
The ongoing strength of Azure, Microsoft's cloud computing platform, is expected to positively impact Q2 numbers. Most importantly, Azure has witnessed accelerated adoption attributed to digital transformation acceleration by companies globally. Also, the company's workspace communication offering, Teams, has witnessed growing momentum, which will act as a tailwind in the quarter under review. The strong Azure demand and solid Teams uptick are installing confidence among investors.
Earnings: Stockearning’s Estimated EPS for Q2 2022 is expected to be around $2.29 per share suggesting growth of $12.81% per share. A year ago, the company had an EPS of $2.03. In the last quarter, the company produced a 10.19% earnings surprise with an EPS of $2.27. Historical EPS Performance in the past 12 quarters indicates that the company has topped earnings estimates 12 times (100%).
Revenue: the company is expected to report revenues of $50.32 billion, suggesting a 16.82% YoY growth. In the first quarter, the company reported revenue of $45.3 billion, representing an increase of 22%. In addition, operating income was up 27% to $20.2 billion.
Stock movement: MSFT shares have lost 4.1% since the company released its first-quarter earnings. Interestingly, MSFT shares have been UP 29 times out of the past 47 quarters. So, the historical price reaction suggests a 61% probability of the share price going UP once the company reports its fiscal Q2 2022 earnings. According to the Stockearning algorithm, the predicted first-day move is 3%, while the predicted move on the seventh day is 4%.
What analysts are saying
BoA analyst Brad Sills told clients in a note that they believe MSFT is better positioned to create sustained low-digit growth in the next three to five years attributed to the ongoing adoption of Azure cloud computing platform, Office 365 productive suite, and profitable Game Pass and games revenue in Xbox.
He is optimistic about the performance of MSFT's segments. For example, he predicted that Azure, Microsoft's cloud segment, could rise by much to 49 percent, exceeding his previous forecast of 46 percent. In addition, beyond his forecast of $16.6 billion for the segment, the More Personal Computing division, including hardware, could create extra revenues of $250 million.
Sills expects Microsoft will post $50.7 billion in sales for the Q2 of 2022, up 17.6 percent YoY, when it reports earnings on January 25. Also, the analyst increased Microsoft's revenue numbers for Q2 and Q2 to $47.7 billion from $47.3 billion and $52 billion from $51.4 billion, respectively. However, he did not change his price objective of $365 per share.
Cowen analyst Derrick Wood holds a similar viewpoint. He predicted that Azure would continue fueling Microsoft's future growth and that Office 365, the company's cloud productivity suite, would be the largest software-as-a-service business globally. Derrick has a price target of $360 on the stock.
However, Citi's Tyler Radke offered a dissenting viewpoint. Radke disagrees with Microsoft's positive assessment of its cloud business. Because of fewer bookings in Q1 2022, he believes Azure, Microsoft's cloud subsidiary, will slow considerably in contrast to 2021's performance. Meanwhile, he expects Microsoft's earnings to be driven by Office 365 and Dynamics. Radke also dropped his price target from $407 to $376 and lowered his profits projection for this fiscal 2022 from $9.72 to $9.69.
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