3 Key Estimates for Microsoft's (MSFT) Q1 Earnings Report

Shares of Microsoft MSFT sunk Tuesday as part of a larger market downturn on the back of growing concerns about the global economic picture and depressed outlooks from giants such as Caterpillar CAT. With that said, Microsoft could turn things around with a strong performance Wednesday from some of its key business segments.

Quick Overview

Microsoft has continued to dive further into IoT, cloud computing, and artificial intelligence in order to successfully bolster its business beyond its Office and Windows offerings. Microsoft claimed 14% of the cloud market last quarter to come in second behind Amazon’s AMZN 34%. The company also topped IBM’s IBM 8%, Google’s 6% GOOGL, and Alibaba’s BABA 4%, according to Synergy Research Group.

Microsoft boasts an impressive cloud client list that includes Walmart WMT, Coca-Cola KO, Boeing BA, and other giants. Yet the question on many investors’ minds will be can MSFT continue to grow not only its cloud business, but everything else?

 

 

Looking ahead, our current Zacks Consensus Estimate is calling for Microsoft’s fiscal Q1 revenues to pop 13% to hit $27.73 billion. Meanwhile, at the other end of the income statement, Microsoft’s adjusted quarterly earnings are projected to climb by roughly 14.3% to reach $0.96 per share.

Now let’s take a look at some of Microsoft’s specific business units that could end up being more important than MSFT’s top and bottom line performances, especially in the near-term. The three key business segments that we will look at today are Productivity & Business Processes, Intelligent Cloud, and More Personal Computing.

To understand what to expect from these vital units we can turn to our exclusive non-financial metrics consensus estimate file. The Zacks Consensus NFM file contains detailed estimate data for business segment metrics and non-financial metrics reported by companies. The data is acquired from digest and contributing broker models and includes the independent research of expert stock market analysts.

Productivity & Business Processes

Microsoft’s Productivity & Business Processes unit features Office, LinkedIn, and Dynamics CRM businesses. The company is projected to report revenues of $9.397 billion in this unit, based on our NFM consensus estimates.

Investors should note that this would represent a roughly 14% jump from the $8.238 billion Microsoft reported in the year-ago quarter. MSFT’s Productivity & Business Processes unit climbed 13%, or $1.1 billion to $9.668 billion last quarter.

Intelligent Cloud

Microsoft’s Intelligent Cloud business has become one of its most important units and is comprised of the company’s server and enterprise products. This segment also includes its much talked about Azure unit. MSFT’s Intelligent Cloud segment is projected to surge just over 20% from $6.922 billion to touch $8.327 billion.

Intelligent Cloud revenues climbed $1.8 billion or roughly 23% to reach $9.606 in Q4. More specifically, Azure revenue soared 89% last quarter due, in large part, to software as a service expansion.

More Personal Computing

We close with a look at what is still Microsoft’s largest business segment. More Personal Computing, which features Microsoft Windows, Devices, Gaming, and Search, is projected to see its revenues pop approximately 8% from $9.378 billion to reach $10.144 billion.

More Personal Computing saw revenues of $10.811 billion last quarter. This marked a 17% or $1.6 billion jump. Investors might be a tad bit disappointed by this slow down, but 20% cloud growth could help offset More Personal Computing’s slower growth.

Make sure to check back here for our full analysis of Microsoft’s actual results after the firm reports its Q1 financial metrics after the market closes on Wednesday.

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