Microsoft Eyes Growth with AI Push as Q1 Earnings Loom Amidst Azure Shifts
1min read As of last week, Microsoft (MSFT) showed a 0.35% increase, marking two consecutive days of gains, with a 0.49% rise over the past two days. Over the last week, the company’s stock increased by 0.44%, contributing to an 11.87% rise year-to-date, positioning its market cap at $3.11 trillion.
Microsoft is scheduled to report its first-quarter earnings for fiscal year 2025 on October 30, post-market close. Analysts anticipate earnings per share to be around $3.10, up from $2.99 the previous year. Revenue is expected to reach $64.53 billion, compared to $56.52 billion in the corresponding period last year.
In August, Microsoft updated its fiscal year 2025 investor metrics, incorporating notable departmental changes. Microsoft 365 business products and cloud services, initially part of the Intelligent Cloud segment under Azure, are now included in the Productivity and Business Processes (PBP) segment.
Revenue growth remains crucial, with Microsoft reporting a 3.6% increase last quarter, surpassing expectations by nearly $2 billion. Investors will closely monitor whether Microsoft can sustain or exceed its growth trajectory, especially given its AI and cloud computing advancements.
Microsoft’s operating margin stands at 44.6%, with a gross margin of 69.8%, highlighting the company’s profitability. Investors remain attentive to any shifts in operating income, tied to a robust 26.7% increase in EBITDA, reflecting operational efficiency.
The strength of Microsoft's customer base in key areas such as Azure and enterprise software is pivotal. With earnings per share increasing by 21.9% year-over-year, this expansion hints at long-term growth potential.
Guidance offered by Microsoft provides insights into the company’s outlook, influencing stock movements. A favorable outlook typically suggests strong future performance, whereas a conservative prediction might invoke concern.
Analysts maintain a positive stance, with a buy recommendation and a price target range of $420 to $600, surpassing the current stock price of $418.74. This aligns with Microsoft's solid fundamentals, characterized by its impressive margins.
Despite optimistic expectations for fiscal profitability, Piper Sandler has adjusted its target price from $485 to $470, reflecting concerns over recent Azure alterations that haven't been fully projected. Analyst Brent Bracelin noted Azure IaaS revenue decline and emphasized the potential for Microsoft's AI revenue, expected to exceed $10 billion by 2025, with the majority stemming from Azure.
Last month, it was suggested that recent reporting changes should provide a clearer perspective on Azure operations.
Microsoft recently announced a five-year agreement with the UK's Crown Commercial Service, allowing British government entities to leverage Microsoft’s AI offerings. This partnership, beginning November 1, seeks to drive digital transformation, utilizing Microsoft 365, Azure, and commercial applications.
Microsoft's CEO in the UK highlighted the opportunity AI technology offers in transforming public services and supporting economic growth, underscoring Microsoft's commitment to enhancing public sector infrastructure.
