Technology giant Microsoft Corp MSFT reports second quarter financial results after the market close on Tuesday, January 30.
Here’s a look at key earnings estimates, what analysts are saying, and the key things investors need to watch.
Earnings estimates: Analysts expect Microsoft to report second-quarter revenue of $61.10 billion, according to data from Benzinga Pro.
The company reported revenue of $52.74 billion in the second quarter of last year. Microsoft has beaten analysts’ revenue estimates in four of the last five quarters.
Analysts expect Microsoft to report second-quarter earnings per share of $2.78 compared to $2.32 a year earlier. The company has beaten analysts’ earnings per share estimates for the last five consecutive quarters.
What analysts say: Microsoft’s second-quarter earnings report could be one of the most important elements to kick off earnings season, according to Wedbush analyst Daniel Ives.
Ives, who has an Outperform rating and a $450 price target on Microsoft, said Microsoft’s report could represent the season’s biggest gain, regardless of sector.
“The two standard bearers of the AI revolution are the godfather of AI Jensen and Nvidia with Nadella and Richmond, the fundamental beginning of the cloud for AI use cases around the world now exploding with Microsoft’s earnings Tuesday after the bell a key barometer for the pace of AI spending,” Ives said.
Ives said the second quarter could be strong for Microsoft based on an acceleration of its cloud offerings for Azure.
“We would expect a solid pace for the December quarter with Nadella & Co. likely to surpass Street revenue of $61 billion and EPS of $2.77. The most important metric will be Azure growth.”
Ives said fiscal 2024 has strong AI use cases for Microsoft and others, but it’s fiscal 2025 that “remains the real downturn year for AI growth.”
“We believe the stock has yet to price in what we see as the next wave of cloud and AI growth coming in Redmond’s history with fiscal 24 with a strong cloud competitive advantage over Amazon and Google.”
Ives said that ChatGPT’s growth for Microsoft is just starting to hit “its next gear.”
“Simply put, we see this as Microsoft’s ‘iPhone Moment,’ with AI set to change the cloud growth trajectory in Redmond over the next few years.”
Here’s a look at other analysts’ ratings and price targets for Microsoft in January:
Piper Sandler: Overweight rating, $455 price target
Fiduciary Securities: Buy rating, $600 price target
Exane BNP Paribas: Upgrade from Neutral to Outperform, $471 price target
BMO Capital: Beats valuation, raises price target from $400 to $420
Related Link: Microsoft Azure’s Skyrocketing Growth, AI Innovations Signal a Bright Future for Investors: Analysts
Key things to look out for: Artificial intelligence remains key to Microsoft’s earnings report and conference call.
“We are rapidly infusing AI into every layer of the technology stack and across every role and business process to drive productivity gains for our customers,” said the Microsoft CEO Satya Nadella he said during the company’s first-quarter report.
Microsoft’s quarterly report also comes in the wake of concerns over deepfake images of Taylor Swift made using artificial intelligence which quickly went viral on social media.
Nadella said the images were “alarming and terrible” and told NBC News Lester Holt that companies need to “move fast” to combat the images.
“Yes, we need to act. I think we will all benefit from the fact that the online world will be a safe world.”
Another element that could be brought into focus could be Microsoft’s gaming division. The company recently announced layoffs for its recently acquired Activision Blizzard unit and its Xbox division. Comments on the strength or weakness of the gaming industry could help provide further commentary on the layoffs and what lies ahead for the industry.
MSFT Price Action: Microsoft shares rose 1.43% to $409.72 at market close on Monday compared to a 52-week trading range of $242.20 to $409.98. Microsoft shares are up 65% over the past year.
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