Microsoft Earnings: What to Watch – Wall Street Journal
EARNINGS FORECAST: Analysts surveyed by Thomson Reuters expect Microsoft to report earnings per share of 58 cents, up from the loss of 40 cents that the company reported in the year-earlier period.
SALES FORECAST: Analysts expect Microsoft to post sales of $22.1 billion, roughly the same amount the company posted a year ago.
WHAT TO WATCH:
—CLOUD FORECAST: Microsoft’s Azure cloud-computing service, though small compared with industry leader Amazon Web Services, continues to grow quickly. The company is benefiting from both the rapid progression in on-demand, web-based computing broadly and improvements in Microsoft’s own products that are starting to rival AWS offerings. Stifel Nicolaus & Co. analyst Brad Reback estimates that Azure grew more than 95% year-over-year to roughly $630 million.
—OFFICE ONLINE: The software giant is quickly moving corporate customers from running Office on their own computers to using Office 365, the web-based version of its productivity software. In a recent survey of technology resellers, Nomura Securities International Inc. found that 71% of respondents said customers are adopting Office 365 at a faster pace than a year ago, while 25% said customers were adopting Office 365 at a similar pace compared with a year ago. Customers, though, typically pay less money upfront for Office 365 than they have for Office, though subscription revenue over the long term can wind up being greater.
—WITHER WINDOWS: Microsoft said last week that it won’t hit its target of one billion Windows 10 devices in use by June 2018, blaming it on the company’s pullback from making smartphones that would have run Windows 10. What’s more, International Data Corp. said personal-computer shipments fell 4.5% for the period ended in June, though that was better than the 7.4% decline it had projected. Those declines should put pressure on Windows revenue from PC makers.
—LINKEDIN UPDATE: Microsoft announced plans last month to acquire LinkedIn for $26.2 billion, its largest acquisition ever. Investors have largely applauded the deal and Microsoft’s rationale for weaving the professional social network into its Office and Dynamics products. The company may shed some light on timing of the deal to close as well as the potential financial impact of the acquisition on guidance for the coming fiscal year.
Write to Jay Greene at Jay.Greene@wsj.com