Microsoft results could take valuation above $1tr

New York: Microsoft Corp. analysts expect strong third-quarter results from the company on Wednesday as its cloud-computing division continues to see rapid growth.

It was to report third-quarter results after the market closes on Wednesday, and analysts are expecting a strong print, helped in particular by its cloud-computing division, which continues to see rapid growth.

The report could extend a rally that has lifted Microsoft shares more than 33 per cent off a December low. Microsoft closed at a record on Tuesday and the company’s market capitalisation is within 4 per cent of $1 trillion (Dh3.67 trillion).

Analysts are expecting broad strength in the quarter, but sales of the company’s Azure cloud-computing product are likely the most highly anticipated number in the report.

Wedbush analyst Daniel Ives forecast “a solid beat across the board on both the top and bottom line,” with cloud strength acting as “the fuel in the tank.”

According to estimates compiled by Bloomberg, Azure is expected grow more than 68 per cent on a year-over-year basis. While this represents a slowdown from the 93 per cent growth reported a year ago, the bigger scale underlines Microsoft’s central position in a key sub-sector of the information technology ecosystem, one dominated by Amazon Web Services only a few years ago.

The company’s Intelligent Cloud division accounted for 29.2 per cent of Microsoft’s 2018 revenue, according to Bloomberg data, up from 25.3 per cent in 2015. KeyBanc Capital Markets’ Brent Bracelin wrote that the cloud business had “structurally improved Microsoft’s growth trajectory,” creating the prospect of sustained double-digit annual growth. Goldman Sachs wrote that Azure’s positive momentum is “enabling the company to significantly outpace the overall market’s growth.”

Earnings are seen rising 4.9 per cent in the quarter, while revenue gains 11.3 per cent. That represents the slowest quarterly pace of year-over-year revenue growth since 2017, per Bloomberg data, but Mizuho Securities called it strong “for a company its size.”

— Bloomberg