Microsoft Beats Revenue and EPS Estimates, Driven by AI and Cloud Computing

Piper Sandler's Brent A. Bracelin raised their price target on Microsoft (NASDAQ: MSFT) by 2.2% from $455 to $465 on 2024/04/26. The analyst reiterated their Strong Buy rating on the stock.

Bracelin's update followed an assessment of Microsoft's 2024/04/25-dated Q4 2023 earnings report and participation in the earnings call. The analyst reported that Piper Sandler's price target hike was catalyzed by the strong secular tailwinds in AI and cloud computing, which accelerated Azure revenue growth by 31%.

The firm's optimistic view on Microsoft was strengthened by the company's accelerating growth and the leadership's dedication to maintaining a 43% or higher operating margin in the upcoming year, even in a period of high capital investment, Bracelin noted.

For Q3 2024, Microsoft reported earnings per share (EPS) of $2.94, beating the Zacks Consensus Estimate by 4.63% and Q3 2023's earnings by 20%. Revenue for the quarter stood at $61.86 billion, surpassing the Zacks Consensus Estimate by 2% and Q3 2023's revenue by 17%.

Microsoft's Productivity & Business Processes segment revenue for Q3 2024 reached $19.6 billion, up 12% year over year (YOY). The Intelligent Cloud segment revenue was $26.7 billion, up 21% YOY, while the More Personal Computing segment revenue stood at $15.6 billion, up 17% YOY. The company's operating income also showed strong growth, reaching $27.6 billion, up 23% YOY.

Looking ahead, Microsoft's management provided guidance for Q4 2024 and FY 2025. For Q4 2024, the company expects Productivity & Business Processes segment revenue of $19.9 billion to $20.2 billion, Intelligent Cloud segment revenue of $28.4 billion to $28.7 billion, and More Personal Computing segment revenue of $15.2 billion to $15.6 billion. For FY 2025, they anticipate double-digit revenue and operating income growth.

Chairman & CEO Satya Nadella highlighted the impact of Microsoft Copilot and the Copilot stack in driving AI transformation and better business outcomes across various industries. Executive VP & CFO Amy Hood attributed the strong performance to the company's sales teams and partners, with Microsoft Cloud revenue reaching $35.1 billion, up 23% YOY.

In addition to Piper Sandler, other analysts also updated their ratings on Microsoft on 2024/04/26. Bernstein's Mark Moerdler raised their price target by 5.2% from $465 to $489 and maintained their Buy rating on the stock. Goldman Sachs's Kash Rangan increased their price target by 14.4% from $450 to $515 and maintained their Strong Buy rating. JP Morgan's Mark Murphy raised their price target by 6.8% from $440 to $470 and also maintained a Strong Buy rating.

The consensus among top-rated analysts currently stands at 100% Strong Buy or Buy ratings for Microsoft. No analysts rate the stock as a Hold, and none recommend or strongly recommend selling.

Analysts forecast that Microsoft's upcoming year will deliver earnings per share (EPS) of $12.67. If these predictions hold true, the company's next yearly EPS will be up by 9.3% on a year-over-year basis.

Since Microsoft's latest quarterly report on 2024/04/25, the stock price has risen by 1.8%. Year-over-year, the stock has increased by 37.6%, outpacing the S&P 500, which has grown by 25.7% during the same period.

Piper Sandler analyst Brent A. Bracelin is ranked in the top 1% out of 4,566 Wall Street analysts by WallStreetZen. They have an average return of 8.3% and a win rate of 52.9%. Bracelin specializes in the Healthcare and Consumer Cyclical sectors, among others.

Microsoft Corporation, headquartered in Redmond, Washington, is a global company that develops, licenses, and supports software, services, devices, and solutions. The company operates in three segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. Microsoft's offerings include Office, Exchange, SharePoint, Microsoft Teams, Office 365 Security and Compliance, Microsoft Viva, Skype, Outlook.com, OneDrive, LinkedIn, Dynamics 365, SQL, Windows Servers, Visual Studio, System Center, GitHub, Nuance, Azure, Surface devices, Xbox hardware, and Bing. The company sells its products through various channels, including OEMs, distributors, resellers, digital marketplaces, online stores, and retail stores.

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