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Microsoft (MSFT) to Report Q2 Earnings: What's in the Cards?

Microsoft MSFT is set to report second-quarter fiscal 2023 results on Jan 24.

The Zacks Consensus Estimate for revenues is pegged at $52.93 billion, indicating growth of 2.32% from the figure reported in the year-ago quarter.

The consensus mark for earnings has been revised upward by a penny to $2.29 per share over the past 30 days, although the figure suggests a decline of 7.6% from the figure reported in the year-ago quarter.

Microsoft’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters while missing in one, the average surprise being 2.64%.

Let’s see how things have shaped up for the upcoming announcement:

Microsoft Corporation Price and EPS Surprise

Microsoft Corporation Price and EPS Surprise
Microsoft Corporation Price and EPS Surprise

Microsoft Corporation price-eps-surprise | Microsoft Corporation Quote

Teams Momentum to Aid Growth

The momentum witnessed for Teams, Microsoft’s workspace communication offering, might have acted as a tailwind in the to-be-reported quarter. Teams’ user growth is expected to have been driven by the continuation of remote work and mainstream adoption of the hybrid/flexible work model.

The introductions of Teams Rooms, Mesh for Teams and Teams Essentials are noteworthy developments. Teams’ expanding customer base and features have been actually helping Microsoft win share in the enterprise communication market against Zoom ZM. Shares of Microsoft have plunged 22.2% in the past year compared with Zoom’s decline of 57.1%.

The strong adoption of Dynamics 365 is expected to have driven top-line growth in the to-be-reported quarter. Microsoft expects revenue growth for Dynamics to be in the mid-to-high teens range, driven by strength in Dynamics 365, including continued momentum in PowerApps.

PC Shipment Decline Likely to Hurt Top Line

Revenues from Windows are likely to have been driven by steady traction seen in Windows Commercial products and cloud services growth amid weak PC demand.

The decline in personal computer (PC) shipments in the first three quarters of 2022, after two consecutive years of strong year-over-year growth, aggravated in the fourth quarter according to the latest data compiled by market research firm Gartner.

Among big PC vendors, Dell Technologies DELL, Lenovo LNVGY and Apple registered a decrease in shipments.

Dell Technologies’ PC volumes plunged 37% to 10.88 million units, while Lenovo registered a decline of 28.6% year over year in shipments to 15.66 million units.

For More Personal Computing segment, Microsoft projects revenues between $14.5 billion and $14.9 billion, pressured by the sharp decline in the personal computer market. The company sees Windows OEM revenues down in the high 30s.

The Zacks Consensus Estimate for More Personal Computing revenues is currently pegged at $14.7 billion, indicating 18.8% decline from the figure reported in the year-ago quarter.

Continued weakness in the PC market demand and advertising spend is expected to have adversely impacted Windows OEM, Surface, LinkedIn and search and news advertising revenues.

For Intelligent Cloud, this Zacks Rank #4 (Sell) company anticipates revenues in constant currency to increase between 22% and 24% to a range of $21.25-$21.55 billion. The company sees Azure constant currency growth to decelerate 5 percentage points sequentially.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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