Microsoft's Azure Growth and Cloud Bookings Propel Q3 Earnings to Outstanding Levels

Evercore ISI Group's Kirk Materne raised their price target on Microsoft (NASDAQ: MSFT) by 2.1% from $475 to $485 on 2024/04/26. The analyst maintained their Buy rating on the stock.

According to Materne, the impressive growth of Azure and Cloud bookings were the standout factors in Microsoft's "outstanding" Q3 2024 earnings report, released on April 25, 2024. Materne predicted that Microsoft will continue to dominate the cloud computing industry in the second half of 2024. The analyst also highlighted the significant impact of Copilot on O365 Commercial ARPU and the continued market share gains by Azure in the same period.

In Q3 2024, Microsoft reported earnings per share (EPS) of $2.94, surpassing the Zacks Consensus Estimate by 4.63% and exceeding Q3 2023's $2.45 by 20%. The company's revenue for the quarter reached $61.86 billion, beating the Zacks Consensus Estimate by 2% and outpacing Q3 2023's $52.86 billion by 17%.

The segment revenue breakdown for Q3 2024 was as follows: - Productivity & Business Processes: $19.6 billion, a 12% year-over-year (Y/Y) increase. - Intelligent Cloud: $26.7 billion, a 21% Y/Y increase. - More Personal Computing: $15.6 billion, a 17% Y/Y increase.

Microsoft's operating income for Q3 2024 amounted to $27.6 billion, representing a 23% Y/Y growth.

Looking ahead, Microsoft's management provided guidance for Q4 2024 and FY 2025. For Q4 2024, the company expects the following segment revenues: - Productivity & Business Processes: $19.9 billion to $20.2 billion. - Intelligent Cloud: $28.4 billion to $28.7 billion. - More Personal Computing: $15.2 billion to $15.6 billion.

For FY 2025, Microsoft anticipates double-digit growth in both revenue and operating income.

Chairman and CEO Satya Nadella emphasized the transformative power of Microsoft Copilot and the Copilot stack, stating that they are driving improved business outcomes across various roles and industries. Executive VP and CFO Amy Hood credited the strong execution by Microsoft's sales teams and partners for the impressive 23% Y/Y growth in Microsoft Cloud revenue, which reached $35.1 billion for the quarter.

Other analysts also updated their ratings and price targets for Microsoft on April 26, 2024: - Bernstein's Mark Moerdler raised their price target by 5.2%, from $465 to $489, while maintaining their Buy rating on the stock. - Goldman Sachs's Kash Rangan raised their price target by 14.4%, from $450 to $515, and maintained their Strong Buy rating. - JP Morgan's Mark Murphy increased their price target by 6.8%, from $440 to $470, and maintained their Strong Buy rating.

It is worth noting that 100% of the top-rated analysts currently rate MSFT as either a Strong Buy or Buy. No analysts consider it a Hold, and none recommend selling the stock.

The consensus forecast among analysts suggests that Microsoft will achieve earnings per share (EPS) of $12.67 for the upcoming year. If the analysts' predictions hold true, this would represent a 9.3% increase in yearly EPS on a year-over-year basis.

Since the release of Microsoft's Q3 2024 earnings report on April 25, 2024, the stock price has risen by 1.8%. Over the past year, the stock has seen substantial growth of 37.6%, outperforming the S&P 500, which has risen by 25.7% during the same period.

Kirk Materne, the analyst who raised Microsoft's price target, is ranked in the top 18% of Wall Street analysts by WallStreetZen. With an average return of 8% and a win rate of 54.5%, Materne specializes in the Technology sector.

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. Notable offerings include Office, Microsoft Teams, Dynamics 365, Azure, Surface devices, Xbox hardware, and Bing search engine. Microsoft's strong performance in Q3 2024 and positive analyst ratings indicate a promising outlook for the company's future.

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