Microsoft Q4 2024 earnings preview: can growth momentum sustain?

When will Microsoft report its latest earnings?

Microsoft is set to release its fourth-quarter (Q4) financial results on Wednesday, 31 July at 6.10am (AEST) after US market closes.

Highlights of previous quarter

In the previous quarter, Microsoft guided that it expects capital expenditures to increase 'materially on a sequential basis' due to increased cloud and artificial intelligence (AI) infrastructure investments However, markets took comfort from the company’s guidance that despite the significant investments, 2024 financial year (FY) operating margins will still be up over 2 points year-on-year (YoY), while 2025 FY operating margins will be down only about 1 point YoY.

Any resilience in the company’s margins will be welcomed Market participants will also want assurance that the significant investment costs will scale into profitable features quickly, rather than being a long-term investment One may recall how Meta’s share price tumbled as much as 19% in its previous earnings release, as investors did not buy into the company’s 'long-term' investments in AI and the metaverse.

Cloud division remains pivotal to earnings

• Intelligent cloud

Intelligent Cloud remains Microsoft’s highest-growth segment and accounts for 43% of its total revenue For Q4 2024, expectations are for the segment to grow 19.5% YoY to US$28.7 billion Previously, stronger-than-expected growth in this segment was one of the key reasons for the surge in Microsoft’s share price During the quarter, Microsoft managed to improve its market share in the worldwide cloud infrastructure market to an all-time high of 25%, trailing just behind Amazon's Web Services (AWS) at 31%.

This leaves little room for error, given that a series of comments from Microsoft’s management team seems to anchor expectations for strong momentum in the adoption of Azure AI services to continue.

• Azure AI

The number of Azure AI customers continues to grow, average spend continues to increase, and there is an “acceleration of revenue from migrations to Azure” More famously, Chief Financial Officer Amy Hood said that “near-term AI demand is a bit higher than available capacity”.

• Personal computing

Personal Computing surprised on the upside in Q3 2024, driven by better-than-expected performance in gaming and Windows OEM YoY growth may stabilise at 11.2% in Q4 2024, with expectations for recovery to continue in the low double-digit growth range.

• Productivity and business processes

This segment may offer stable growth of 10% YoY in Q4 2024, further underpinned by average revenue per user (ARPU) growth from continued E5 momentum and early progress with Copilot for Microsoft 365.

Microsoft's intelligent cloud division chart

What to expect

Continued growth in several product offerings will remain on watch Azure Arc, which allows its customers to run Azure services anywhere (across on-premises and multi-cloud platforms), has increased two-fold in the previous quarter to 33,000 customers.

New AI features have boosted LinkedIn premium growth, with revenue up 29% YoY previously GitHub revenue has accelerated to over 45% YoY as well, fuelled by a surge in GitHub Copilot adoption Microsoft Fabric, which is its next-generation analytics platform, has over 11,000 paid customers Copilot in Windows is also available on nearly 225 million Windows 10 and Windows 11 PCs, up two times quarter-on-quarter.

Mass adoption of these features is likely to persist, with investors keeping an eye on the growth progress ahead.

Stock performance

Revenue growth

• Q4 2024 forecast: revenue growth of 14.5% YoY, with revenue at US$64.4 billion
• Comparison to Q3 2024: revenue growth of 17% YoY
• Comparison to Q4 2023: revenue of US$56.2 billion

Earnings per share (EPS)

• Q4 2024 forecast: expected to increase 9% YoY to US$2.931
• Comparison to Q4 2023: EPS of US$2.69
• Comparison to Q3 2023: EPS growth of 20% YoY

Microsoft earnings chart

Microsoft technical analysis

Microsoft’s share price has been trading within an upward trend, with higher highs and higher lows since October 2023. A rising channel pattern seems to be in place, with recent interaction with the upper channel trendline at the US$471.00 level finding some near-term resistance. A bearish crossover in its daily moving average convergence/divergence (MACD) may raise the odds of a near-term breather.

Any deeper retracement may leave the US$434.00 level on watch as a key support confluence to hold. However, it will probably take much more to signal a wider trend change, potentially with a breakdown of the rising channel as an initial indication. Until that happens, the broader upward trend prevails, with immediate resistance to overcome at the US$471.00 level.

Microsoft daily chart