Microsoft Earnings Q2 2018 earnings preview

Positive outlook

Compared to several other tech names such as Apple Inc. and Facebook Inc., Microsoft had a relatively positive 2018 with prices rising progressively to close the year up 18.7%. Certainly, there had been less as much worries over US-China trade or regulatory concerns extended to this tech company, which had seen steady growth from its core businesses. Refinitiv polls currently places the 12-month target price at $125.70, which represents a double-digit price growth, likely on the back of steady growth momentum for the company. This is accompanied by a consensus ‘buy’ rating from brokers. That said, despite the uptrend that it is expected to sustain, the match up of results against the consensus could still send ripples through to prices.

Refinitiv consensus points to earnings of $1.09 earnings per share, down slightly from $1.14 in Q1 2018. Revenue is expected at $32.49 billion from $29.08 billion in Q1 2018. This falls between the $31.9 billion to $32.7 billion guidance provided by Microsoft in their Q1 2018 earnings call.

What to watch

Breaking down the segments for Microsoft, the bulk of the revenue can be seen accounted for by its More Personal Computing and Productivity and Business Processes units in the previous quarter. Nevertheless, growth from both were not able to rival that of its Intelligent Cloud segment, encompassing the Azure unit and is also the segment which Microsoft had been shifting their focus towards. What this would mean would be that a miss here could cost Microsoft more than a further slowdown in growth for the likes of its More Personal Computing unit.

Prices had whipsawed after the Q1 2018 results release, trading higher eventually on the positive outlook from the earnings call, all due to play a part in the price trajectory here.