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Azure & Office 365 to Aid Microsoft's (MSFT) Q2 Earnings

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Microsoft Corp.  MSFT is slated to report second-quarter fiscal 2019 results on Jan 30.

The company benefits from enterprise strength, robust Office 365 & Azure adoption. Further, its blockchain deals and acquisition synergies to enter the AR/VR market is a key catalyst in the to-be-reported quarter.

Office 365 is a subscription plan to access Office applications and other productivity services utilized in cloud services. Microsoft is firing on all cylinders to catch up with Alphabet’s G-Suite by empowering Office 365.

LinkedIn is also growing much faster than previously anticipated. In the last reported quarter, LinkedIn revenues surged 33% from the year-ago quarter (same at cc) to $1.46 billion. LinkedIn sessions were up 34%, reflecting acceleration in engagement.

Click here to know how the company’s overall Q2 performance is likely to be.

Microsoft Corporation Price and EPS Surprise


Microsoft Corporation Price and EPS Surprise | Microsoft Corporation Quote

Azure, Office 365 & Dynamics: Key Growth Drivers

For second-quarter fiscal 2019, Productivity and Business Processes revenues are expected between $9.95 billion and $10.15 billion, driven by double-digit growth in Office commercial and Dynamics. Office is anticipated witness continued momentum in new subscriber growth.

The Zacks Consensus Estimate for revenues for the Productivity and Business Processes segment is currently pegged at almost $10.09 billion, much higher than $8.95 billion reported in the year-ago quarter.

Microsoft is benefiting from growing user base of its different applications like Microsoft 365 and Teams. Both solutions continue to gain strong adoption. Microsoft 365 has been chosen by the likes of Eli Lilly and Company in recent times. Microsoft Teams is now utilized by roughly 329,000 organizations, including 87 of the Fortune 100.

More importantly, Microsoft is adding features on a regular basis to these applications. Apart from strengthening cybersecurity features of Microsoft 365, the company integrated new AI-driven features, including automated slide design, Cortana reminders, enhanced search experiences and real-time meeting transcription, among others.

In Microsoft Teams, the company is adding automated translation support for meetings, shift scheduling for firstline workers, and new industry-specific offerings for healthcare and small businesses.

Moreover, Microsoft is well-poised to gain on strong growth in no-code app building and business analytics in the cloud, driven by the company’s investments in Power BI, Power Apps and Flow. The Open Data Initiative, which is a partnership between Microsoft, Adobe ADBE and SAP SE SAP, is expected to strengthen the company’s dominant position further.

Notably, Azure's revenues soared 76% at cc on a year-over-year basis in the last reported quarter.

The company added almost 100 new capabilities to Azure in the last reported quarter, with focus on existing workloads like security and new workloads like Internet of Things (IoT) and Edge AI. Azure’s clientele continues to expand with Volkswagen, Anheuser-Busch In Bev and Mastercard selecting the cloud platform.

The momentum is expected to continue in the to-be-reported quarter.

Zacks Rank & Stocks to Consider

Currently, Microsoft has a Zacks Rank #3 (Hold).

Pure Storage, Inc. PSTG, sporting a Zacks Rank #1 (Strong Buy), is a stock worth considering in the same sector. You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term EPS growth rate for Pure Storage is currently pegged at 17.5%.

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