Even the mighty Microsoft is not immune to economic depression continues to wreak havoc on companies both large and small.
Shares of Microsoft rose about 6% in pre-market trading on Wednesday as the tech giant warning on slowing growth in the bread and butter cloud business. The company also posted a weak quarter for PCs as consumers held back from buying big tickets amid economic uncertainty.
During the earnings call, Microsoft CFO Amy Hood note that “the macroeconomic environment becomes more complex” as the previous quarter progressed.
Microsoft has most visited bookmarks on Yahoo Finance in money markets, underscoring investor anger over the company’s relatively lackluster quarterly results.
Here’s what Wall Street analysts are saying about Microsoft’s mixed quarter:
Jefferies ‘Brent Thill
“This macroeconomic storm has even led to one of the best stories in the tech sector, with 1) 1 percentage point of Azure [sales] missed out and guidance decelerated by 5 percentage points, 2) 16% year-over-year flat currency booking growth (vs F4Q 35%), 3) decline in PC and 4) spending advertising spending slows down. Bright spots include maintaining steady 10% monetary revenue growth + guidance for fiscal year 23 and O365 Comm. resilience. Microsoft has guided operating profit margin for FY23 down 1 percentage point year-over-year, but we believe they have the leverage to stabilize EPS and hit $10.60 or more during the year. finance 24, helping to reach our $270 price target based on 25x [PE multiple] EPS. “
Citi’s Tyler Radke
“Despite the meeting instructions on leading/last numbering, [fiscal] Q1 wasn’t the cleanest quarter for Microsoft. The results show another mild Azure bug, with the outlook implying a steeper deceleration path on cloud optimization. Margins also faces new downsides from the combination of weaker PCs and higher electricity costs for Azure. Despite efforts to offset these (slower hiring), margins are still slashed by ~100 basis points for the full year. Although a disappointment, nothing seems to be structurally broken here and we see Microsoft showing resilience, increasing revenue and [operating] double-digit earnings… amid a challenging year from a tough situation, weaker macros, inflation/energy costs and slow down IT budget. We think Microsoft can continue to leverage its leading competitive positions and customer relationships in some of the largest software markets to continue driving profits that outperform its peers. industry with megacap tech/S&P 500 and maintained Our Buy despite the drop in revenue. “
Kirk Materne of Evercore ISI
“While we understand that any ‘wobble’ in Azure will be amplified in this market, it is worth remembering that Azure is still showing rapid growth in size, capturing market share in one the cloud market is huge and the weakness is largely due to the slower pace of consumption in the small business market and the slowdown in services-per-seat (EMS) related transactions – this is not the case. competitive (or largely corporate) issues, we do not fundamentally believe that Azure’s results or guidance should be viewed as a ‘thesis-breaker’ for the commercial business sector – it is still expected to grow ~20% in constant currency this year.Moreover, when combined with another strong quarter from the O365 commercial business (+17%), we I believe the enterprise side of the business remains solid – despite the macro – towards CY23. In the end, while Microsoft has pulled out [operating] profit margin target slightly reduced (100 basis points) due to PC weakness and higher energy costs, we believe there is little doubt that Microsoft will manage headcount and investments investment to maintain EPS and cash flow. Therefore, we believe that our revised estimate is likely to increase the price in terms of costs. “
Brian Sozzi is a great editor and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and more LinkedIn.
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