Big tech

Microsoft Earnings: What to Expect from the Tech Giant in Fiscal Q3?

Microsoft has pulled back in recent trading sessions. However, the stock can stage a comeback if it can beat analyst estimates in Q2.

Technology heavyweight Microsoft (NASDAQ: MSFT) is releasing its earnings this week. Investors and analysts will follow the event closely, as the sell-off surrounding growth stocks has intensified in 2022 due to the threat of rising interest rates and steep valuation metrics.

MSFT stock is currently down 14% from all-time highs, valuing it at a market cap of $2.22 trillion. Nevertheless, Microsoft has returned over 400% in the last five years and 1,130% since January 2012, easily crushing the broader market despite the pullback.

Let’s see what Wall Street expects from Microsoft in fiscal Q2 of 2022 that ended in December, and the ongoing pullback presents an attractive buying opportunity for investors.

When is Microsoft’s earnings date?

Microsoft is scheduled to release its Q2 of fiscal 2022 results on Tuesday, January 25, 2022, at 5.30 pm Eastern Standard Time.

How can I listen to Microsoft’s earnings call?

Investors who want to listen to Microsoft’s earnings call and access the associated transcript, in addition to the financial statements, will have to go to the company’s Investor Relations Page.

What to expect from Microsoft’s earnings?

Analysts tracking MSFT stock expect the company to report revenue of $50.88 billion and adjusted earnings of $2.31 per share in the quarter ended in December 2021. It represents year-over-year revenue growth of 18%, while expected earnings growth stands at 13.8%.

Microsoft has beaten Wall Street earnings estimates in each of the last four quarters, and this trend is likely to continue in Q2 of fiscal 2022 as well.

Top-line growth should be driven by the company’s cloud computing business, Azure. Microsoft is already the second-largest public cloud platform in the world. According to Statista, the cloud infrastructure market is forecast at $150 billion, while Microsoft accounts for 20% of this market.

The accelerated shift towards remote work and the ongoing business transformation of enterprises continue to positively impact demand for cloud infrastructure services.

However, the focus will expectedly remain on the recent big-ticket acquisition of Activision Blizzard (NASDAQ: ATVI), announced last week. Microsoft disclosed its intention to acquire Activision Blizzard for $68.7 billion in an all-cash deal. It is the largest-ever acquisition in the technology space.

Microsoft is already one of the most prominent players in the worldwide gaming segment, with a share of 9%. A report from Newzoo estimates the global video game industry at $175 billion. So post the acquisition, the combined entity will account for more than 14% of the total market.

Microsoft is fundamentally sound and ended the September quarter with a cash balance of $130 billion. Microsoft is part of multiple high-growth verticals that have allowed the company to perform admirably in the past decade. Its market cap has surged from “just” $300 billion to more than $2 trillion in the last eight years. Moreover, its business model is resilient as Microsoft derives a significant portion of sales via subscriptions, allowing the company to generate cash flows across economic cycles.

If Microsoft can successfully integrate Activision Blizzard, it will be well-positioned to target the metaverse market, which is forecast to touch $800 billion by 2024.

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