Microsoft’s Q4 Results Announcement Will Primarily Revolve Around Azure

-0.42%
Downside
421
Market
419
Trefis
MSFT: Microsoft logo
MSFT
Microsoft

Microsoft (NASDAQ:MSFT) reports its fiscal Q4 results on Jul 18. The company had beat consensus estimates on the back of broad-based strength led by Azure in Q3. Going into Q4, we will be looking to hear on:

  • Cloud trends: In particular, how has Azure been doing on a standalone basis and what are the takeaways from Microsoft’s partnership with Oracle.
  • Windows refresh cycle: Management commentary on when it sees the next Windows refresh cycle driving growth.
  • JEDI contract: Management expectations on how Microsoft is positioned against Amazon to win the contract from Pentagon.

Per Trefis, Microsoft’s shares have a fair value of $122, which is about 10% below the current market price. Our interactive dashboard on Microsoft’s Earnings captures trends over recent quarters along with our forecasts and estimates for the company. You can modify any of the key drivers to visualize the impact of changes on its valuation, and see more Trefis technology company data here.

A Quick Look At Microsoft’s Business Model

Relevant Articles
  1. Up Nearly 70% Since The Beginning Of 2023, Where Is Microsoft Stock Headed?
  2. Up 63% Since The Beginning Of 2023, How Will Microsoft Stock Trend After Q2 Earnings?
  3. Microsoft Stock Is Up 45% YTD And Outperformed The Consensus In Q1
  4. Microsoft Stock Outperformed The Expectations In Q4
  5. Microsoft Stock Is Fairly Priced At The Current Levels
  6. What To Expect From Microsoft Stock In Q3?

Microsoft is a technology company that makes money from the sale of software and hardware for consumer and enterprises. The company’s revenue ($122 billion in 2018) is reported in the following three segments:

  • More Personal Computing (2018 revenue of $42 billion, contributed 38% to total revenue): Segment revenue is derived from the sale of operating systems, devices, gaming offerings and search products.
  • Intelligent cloud (2018 revenue of $32 billion, contributed 29% to total revenue): Segment revenue is derived from the sale of public, private and hybrid server products and related cloud services.
  • Productivity and Business Processes (2018 revenue of $36 billion, contributed 33% to total revenue): Segment revenue is derived from the sale of subscription to Office, revenues from LinkedIn and from Microsoft’s on premise and cloud (Dynamics 365) enterprise solutions (including CRM and ERP).

Operating Trends

  • More Personal Computing revenues reached $42 billion in 2018 from $40 billion in 2016. The change of $2 billion between 2016-18 implied an annualized rate of 2.3%. Q3 2019 revenue came in at $10 billion (13.7% y-o-y). We expect 2019 revenue to reach $44.8 billion (6% y-o-y).
  • Intelligent Cloud revenues reached $32 billion in 2018 from $25 billion in 2016. The change of $7 billion between 2016-18 implied an annualized rate of 13.6%. Q3 2019 revenue came in at $10 billion (22.2% y-o-y). We expect 2019 revenue to reach $35.9 billion (11.5% y-o-y).
  • Productivity And Business Processes revenues reached $36 billion in 2018 from $26 billion in 2016. The change of $10 billion between 2016-18 implied an annualized rate of 17.9%. Q3 2019 revenue came in at $11 billion (7.7% y-o-y). We expect 2019 revenue to reach $41.6 billion (16% y-o-y).
  • Total Revenue reached $110 billion in 2018 from $91 billion in 2016. The change of $19 billion between 2016-18 implied an annualized rate of 10%. Q3 2019 revenue came in at $31 billion (14% y-o-y). We expect 2019 revenue to reach $122.3 billion (10.9% y-o-y).
  • Net income fell to $17 billion in 2018 from $21 billion in 2016. The figure for Q3 2019 was $9 billion – representing a margin of 28.8%. We expect net income to reach $34 billion for fiscal-year 2019, with the net income margin figure being 27.6%.

Per Trefis estimates, the EPS for the fiscal-year 2019 is expected to be $4.4. Taken together with a P/E multiple of 28x, this works out to a fair value of $122.5 for Microsoft’s shares.

Do not agree with our forecast? Create your own price forecast for Microsoft’s Price Estimate by changing the base inputs (blue dots) on our interactive dashboard.

What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs

Like our charts? Explore example interactive dashboards and create your own.