Microsoft’s Revenues Set To Grow As Cloud Services Continue To Gain Traction
Microsoft (NASDAQ:MSFT) is set to announce its Q1 FY 2018 earnings on Thursday, October 26. The company continues to implement its “mobile first, cloud first” strategy, which led to 9% growth in its revenues in Q4 2017. The company continues to develop an ecosystem of cross-device applications and value-added services around its hardware and software. This has resulted in good growth for its Office, Server, Operating System and hardware divisions in the first half of 2017. Below are our expectations for the earnings announcement.
- Office revenues will continue to improve as monthly active users for both commercial and consumer Office 365 grow. As a result, Office productivity revenue is expected to increase for fiscal Q1.
- Microsoft Dynamic, which includes six products for CRM and ERP, has reported solid growth in revenues in the first half of 2017. While Microsoft chooses not to disclose its Dynamics revenue allocation between CRM and ERP, we expect Dynamics software to report growth for Q1.
- Microsoft’s Intelligent Cloud, which includes Azure, Server products, and enterprise services, is witnessing good adoption as Cloud and Big Data analytics continue to gain popularity among its clients. In the previous quarter, Intelligent Cloud revenues grew by 11% as Server products and Cloud services grew 15%, driven by growth in Azure revenue. In Q1 (Q3 CY17), Microsoft continued to ramp up its Azure platform to boost its cloud revenues through IaaS and PaaS solutions. As a result, we expect that the revenues for Azure will continue to grow in the quarter. We also expect revenue growth for Intelligent Cloud will be in the double digits again, due to traction in server products (SQL Server and Windows Server) and cloud services.
- Despite a slowdown in PC sales, Windows OS revenues have reported growth in previous quarters. We expect that Windows OS sales for both Windows OEM non-Pro and Pro will continue to outperform PC sales in this quarter.
- The company continues to aggressively push into the hardware market with its Surface line of devices. In this earnings announcement, we will continue to monitor the growth in revenues for Surface devices. We also believe that the company is nearly done phasing out its phone hardware, and that revenue for the devices segment will report growth in fiscal Q1.
See our complete analysis of Microsoft here
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