Tech

Microsoft expects slowest quarterly revenue growth in five years; Analysts say year-over-year doubts


Microsoft will post its slowest quarterly revenue growth in more than five years on Tuesday, with some analysts questioning whether the company can maintain its annual outlook as the PC market declines and the dollar declines. strong or not.

Soaring inflation this year has raised fears of a global recession and forced consumers and businesses to reduce spending on computers and laptops, denting sales of some Microsoft’s Main products include Windows and Office suites.

Adding to the squeeze, the dollar rose more than 17%, hitting the earnings of companies with large global operations. Microsoft earns more than 50% of its revenue outside of the United States.

“All eyes will be on Microsoft’s ability to maintain FY23 guidance for reported double-digit revenue growth, which we believe,” said Guggenheim analysts. that is at risk,” Guggenheim analysts said last week.

UBS has said the stock looks to have largely priced in a potential walk back against forecasts.

At least 15 brokerages lowered their price targets on the software giant in October, and the company’s shares have fallen by more than a quarter in 2022.

According to data from research firm Gartner, PC shipments fell 19.5% in the third quarter of this year.

Windows Licenses account for about 12% to 13% of Microsoft’s revenue, and the downturn in the PC market is expected to reduce its sales by 100 basis points, said Morningstar senior analyst Dan Romanoff. copy.

The hit is expected to be slightly offset by Microsoft’s Azure cloud services unit, which is set to grow 20% in the first quarter, according to Refinitiv data. by Refinitiv.

“Our CIO survey shows that enterprise IT use Azure likely to win shares vs Amazon AWS,” JP Morgan said in a recent note.

But signs of a slowdown in cloud adoption have begun to emerge. An analysis by Piper Sandler shows that the total revenue of the top 100 software companies is estimated to grow 22% in 2022 and 20% in 2023, down from 33% in 2021.

Software companies are the biggest customers of the cloud platform and their business growth is taken as a proxy for the cloud services sector.

Basic principles

Microsoft’s first quarter revenue is expected to grow 9.5% to $49.61 billion (about Rs 4,10,722 crore), the first sub-10 growth average since the third quarter of the year. financial 2017 – Refinitiv

Estimated earnings per share of $2.30 (about Rs 150)

Street love

48 out of 52 analysts include the percentage of shares it “buys” or higher and four rates it “holds”

The median price target is $315 (approximately Rs. 26,000), down from $336 (approximately Rs. 27,800) in early 2022

Microsoft trades at $246.64 (about Rs 20,300) on Monday

© Thomson Reuters 2022


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