Microsoft Corporation is gearing up to release its fiscal Q1 earnings report on October 22, 2024, and there's much anticipation swirling around this tech giant. Based out of Redmond, Washington, Microsoft is not just any tech company; it boasts a whopping market capitalization of $3.1 trillion. The company has made its mark as one of the leading providers of technology worldwide, delivering everything from cloud solutions and productivity software to gaming consoles. With such a diverse range of offerings, Microsoft plays a significant role both in the software and hardware arenas.
Analysts are expecting the company to report earnings of $3.08 per share, marking a 3% increase from $2.99 per share during the same period last year. This isn’t just wishful thinking; Microsoft has consistently outperformed Wall Street's expectations over the past four quarters. For example, during Q4 2024, the firm reported earnings per share (EPS) of $2.95, which exceeded analysts' forecasts by nearly 1.7%. This reliable track record has investors crossing their fingers for positive numbers this quarter.
Looking beyond the immediate concerns, projections for fiscal 2025 show a promising upward trend. Analysts predict Microsoft's EPS will hit about $13.04, which is up 10.5% from the $11.80 mark recorded in fiscal 2024. By fiscal 2026, the estimates soar even higher, indicating anticipated steady growth with EPS expected to reach approximately $15.02—a 15.2% increase from the prior year.
While these figures sound rosy, Microsoft's stock performance has had its share of ups and downs. The company experienced modest gains, climbing only 10.5% throughout 2024, which is considerably underwhelming compared to the broader market. For reference, the S&P 500 Index recorded gains of 19.7%, and the Technology Select Sector SPDR Fund increased by 16% during the same timeframe. This kind of performance raises eyebrows, especially among those keeping close tabs on tech stocks.
The last reported earnings saw Microsoft’s stock take a dip—over 1%—after the July 31 announcement, largely attributed to disappointing cloud revenue numbers, which came out to only $28.5 billion. This underwhelming report overshadowed the firm’s stronger overall Q4 revenue figure of $64.7 billion. Investors’ worries were heightened when growth rates for Microsoft's Azure, its flagship cloud service, declined from 31% to 29% compared to the previous quarter. The lowered revenue guidance for the upcoming quarter didn’t help calm those nerves, leaving many wondering if the cloud computing segment can keep pace with expectations.
Yet, it's not all doom and gloom for Microsoft. Recently, the tech giant saw its stock soar on September 10 following the announcement of its new AI product, "Strawberry," which is being developed with help from its key partner, OpenAI. This move aligns perfectly with Microsoft's broader strategy to bolster its product lineup with more advanced AI capabilities. Investors are hopeful this innovation may revitalize interest and enthusiasm for Microsoft’s stock, especially amid fears of cooling growth.
Despite the mixed performance and challenges faced by Microsoft, analysts remain largely optimistic about the stock's future. The consensus view is decisively bullish, with ratings tipping toward “Strong Buy.” Out of 38 analysts covering Microsoft, 33 suggest buying enthusiastically, three are moderately positive, and only two have taken the safer route with “Hold” ratings. Interestingly, this sentiment has slightly shifted downward from three months prior when 34 analysts were on the “Strong Buy” bandwagon. Currently, the average target price for Microsoft stock stands at $503.55, hinting at potential gains of about 21.2% from its present levels.
Overall, as Microsoft prepares for its upcoming earnings call, all eyes are on its performance, especially its ability to navigate the pressures within its cloud computing sector. With seasoned analysts and investors eagerly awaiting the financial results, the tone for Microsoft’s future will be set by how well it meets, or even exceeds, expectations. While there's no shortage of excitement surrounding new AI innovations, the company must also effectively address concerns about slowing growth rates and revenue projections to maintain its stronghold on the market.
