Why Microsoft Could Crush FQ4 Earnings

Jul. 12, 2023 12:05 AM ET Microsoft Corporation (MSFT)

Summary

• I expect Microsoft to report strong Q4 earnings on July 25, 2023, due to AI/ChatGPT integration tailwinds in the Cloud segment as well as easing pressures in Personal Computing.
• MSFT’s topline growth re-accelerated in the previous quarter. The EPS trend is very favorable.
• The generative AI market presents a huge growth opportunity for Microsoft. New announcements regarding ChatGPT monetization paths could drive an upside revaluation later this month as well.
• While shares of Microsoft are not cheap, the company remains an interesting AI stock for long-term investors.

Introduction

Microsoft is one of the largest and most successful technology companies in the world. The company’s products and services are used by billions of people around the globe. In recent years, Microsoft has been investing heavily in cloud computing, productivity software, and gaming. These investments have paid off, and Microsoft is now one of the fastest-growing technology companies in the world.

Strong Demand for Cloud Computing

Microsoft’s cloud computing business, Azure, is one of the fastest-growing cloud computing platforms in the world. Azure is used by businesses of all sizes, and it is growing rapidly. In Q3 2023, Azure revenue grew 46% year-over-year.

Strong Demand for Productivity Software

Microsoft’s productivity software, such as Office 365, is also growing rapidly. Office 365 is a suite of productivity applications that includes Word, Excel, PowerPoint, and Outlook. Office 365 is used by businesses and individuals around the world. In Q3 2023, Office 365 revenue grew 19% year-over-year.

Strong Demand for Gaming

Microsoft’s gaming business, Xbox, is also growing rapidly. Xbox is a gaming console that is used by millions of people around the world. Xbox also offers a subscription service called Xbox Game Pass, which gives users access to a library of games. In Q3 2023, Xbox revenue grew 10% year-over-year.

Strong Balance Sheet

Microsoft has a strong balance sheet with $136 billion in cash and short-term investments. This gives the company the financial flexibility to invest in growth and return capital to shareholders.

Conclusion

Microsoft is well-positioned for continued growth in the years to come. The company has a strong cloud computing business, a strong productivity software business, and a strong gaming business. These businesses are all growing rapidly, and they are all expected to continue to grow in the years to come.

Growth Opportunities

Microsoft is still a relatively young company, and it has a lot of growth opportunities. The company is investing in a number of new areas, including:

• Artificial intelligence: Microsoft is investing heavily in artificial intelligence. The company believes that artificial intelligence will be a key driver of growth in the years to come.
• Cybersecurity: Microsoft is also investing in cybersecurity. The company believes that cybersecurity is a growing market, and it wants to be a leader in this area.
• Mixed reality: Microsoft is investing in mixed reality. Mixed reality is a technology that combines the real world with the virtual world. Microsoft believes that mixed reality will be a major technology in the years to come.

Outlook for the Future

Microsoft is well-positioned for continued growth in the years to come. The company has a strong track record of innovation, and it is investing in a number of new growth areas. I believe that Microsoft is a good investment for long-term investors.

Additional Thoughts

In addition to the points mentioned in the article, I would also add that Microsoft is a very well-managed company. The company has a strong leadership team with a track record of success. I believe that this management team will be able to continue to grow Microsoft and deliver value to shareholders.

Overall, I believe that Microsoft is a good investment for long-term investors. The company has a strong track record of innovation, it is well-positioned for growth in the years to come, and it is managed by a strong team.

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