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15th May 2022

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Microsoft CEO Satya Nadella delivers the keynote address at Build, the company's annual conference for software developers Monday, May 6, 2019, in Seattle. (AP Photo/Elaine Thompson)

Microsoft (MSFT) will report its fiscal Q3 2021 earnings after the closing bell on Tuesday, providing investors and analysts with a glimpse at how its Azure cloud platform has performed a year after the coronavirus pandemic upended the global economy.

Here’s what Wall Street is expecting from the company in the quarter compared with how it performed in the same quarter last year.

Revenue: $41.05 billion expected versus $35 billion in Q3 2020

Earnings per share: $1.78 expected versus $1.04 in Q3 2020

Intelligent Cloud: $14.9 billion expected versus $12.3 billion in Q3 2020

More Personal Computing: $12.6 billion expected versus $11 billion in Q3 2020

Microsoft’s biggest growth driver, and the component of its business that has pushed its market capitalization close to $2 trillion, is its Azure cloud division. And analysts are expecting another quarter of explosive growth from the segment, especially as customers continue to migrate to the cloud.

“We see potential for continued acceleration in Azure growth, particularly as the company begins to lap negative consumption impacts from highly affected verticals during the pandemic (i.e., travel, hospitality, and transportation) in the June quarter, where we see the potential for Azure to re-accelerate,” Goldman Sachs’ Kash Rangan wrote in a report previewing Microsoft’s earnings.

Microsoft CEO Satya Nadella delivers the keynote address at Build, the company’s annual conference for software developers Monday, May 6, 2019, in Seattle. (AP Photo/Elaine Thompson)

And while market leader Amazon’s (AMZN) Amazon Web Service (AWS) and Google’s (GOOG, GOOGL) Google Cloud Platform (GCP) are undoubtedly growing as well, Microsoft’s Azure, according to analysts, is making inroads at a faster rate, and stealing market share from its competitors.

“With workforces expected to have a heavy remote focus on the other side of a vaccine being deployed, we believe the cloud shift is just beginning to take its next stage of growth globally,” Wedbush analyst Dan Ives wrote in a research report ahead of Microsoft’s earnings announcement.

“We believe this disproportionally benefits the cloud stalwart out of Redmond, as [Microsoft CEO Satya] Nadella & Co. are so well positioned in its core enterprise backyard to further deploy its Azure/Office 365 as the cloud backbone and artery,” Ives added.

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In his own analyst report, UBS’s Karl Keirstead noted that he is hearing through industry checks that Microsoft’s Azure is gaining ground among larger enterprises.

“Overall cloud adoption is so strong that it’s a tailwind for all three of the big cloud providers, but on the margin we heard more anecdotes suggesting that Microsoft Azure is gaining ground among larger enterprises, likely as it monetizes its installed base and sells a broader cloud suite (Office 365, Teams, etc),” Keirstead said.

It’s not just Azure that’s going to be worth watching. Microsoft’s More Personal Computing business, which includes its Windows and gaming segments, could also see a continued boost thanks to remote working and learning. According to Gartner, worldwide PC shipments totaled 69.9 million units in Q1 2021, a 32% year-over-year increase and the largest jump since the company began tracking shipments in 2000.

Gaming sales meanwhile should prove impressive, though the global chip shortage, which has limited inventory of Microsoft’s new Xbox Series X and Series S consoles, could put a damper on the continued surge in gaming demand.

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2021-04-27 16:47:56

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