Microsoft reports fiscal-Q1 2024 earnings today!

Microsoft (MSFT.US), a major US tech company, is scheduled to report its fiscal-Q1 2024 (calendar Q3 2023) today after the close of the Wall Street session. Company is expected to report the fourth consecutive quarter of below-10% growth in total revenue. However, revenue growth in the Intelligent Cloud business is expected to pick up compared to fiscal-Q4 2023. Let's take a quick look at what to expect from Microsoft's results.

Fiscal-Q1 2024 expectations

• Revenue: $54.54 billion (+8.7% YoY)
  • Productivity & Business Processes: $18.29 billion (+10.8% YoY)
  • Intelligent Cloud: $23.61 billion (+15% YoY)
  • More Personal Computing: $12.89 billion (-4.1% YoY)
• Adjusted Gross Profit: $38.02 billion (+9.7%)
• Adjusted Gross Margin: 69.3% (69.2% a year ago)
• Adjusted Operating Income: $24.12 billion (+12.1% YoY)
  • Productivity & Business Processes: $9.23 billion
  • Intelligent Cloud: $10.31 billion
  • More Personal Computing: $4.41 billion
• Adjusted Operating Margin: 44.3% (42.9% a year ago)
  • Productivity & Business Processes: 50.5%
  • Intelligent Cloud: 43.7%
  • More Personal Computing: 34.2%
• Adjusted Net Income: $19.74 billion (+12.4% YoY)
• Adjusted EPS: $2.66 ($2.35 a year ago)
• Cash Expenditures: $9.25 billion

Growth in cloud segment expected to pick-up

Microsoft is expected to report higher sales and profits for the quarter ended on September 30, 2023. However, there are some concerns about the pace of the growth, especially when it comes to the key cloud segment. Analysts expect sales growth in the Intelligent Cloud segment to reach 15-16% YoY. While this would be slightly higher growth than the one achieved in fiscal-Q4 2023 (calendar Q2 2023), it would be lower than 26% achieved in fiscal-Q1 2023 (a year ago quarter). Performance of the cloud segment will be closely watched as demand for generative AI is strong and Microsoft has invested heavily in the field. Forecasts for fiscal-Q2 2024 as well as full fiscal-2024 may be a key point in the upcoming earnings release from Microsoft.

Source: Bloomberg Finance LP, XTB Research

Will AI bring turnaround?

If analysts' expectations are met and Microsoft indeed reports 8.7% YoY growth in total revenue in fiscal-Q1 2024, it would mark the fourth consecutive quarter of below-10% revenue growth for the company. There is a lot of promise in AI, and it is already supporting Microsoft's Azure results. However, it remains unknown how much AI will impact a company's overall results. Analysts will look for hints - qualitative or quantitative - on how big this impact may be. Microsoft has recently announced a 5 billion AUD investment in AI in Australia and analysts are likely to press management on the earnings call about more details. Apart from AI, traders will also look at how the company view's impact of its recent acquisition of Activision Blizzard on its business.

Source: Bloomberg Finance LP, XTB

A look at the chart

Taking a look at Microsoft (MSFT.US) chart at D1 interval, we can see that the stock has recently pulled back from all-time highs reached in mid-July 2023. Stock has been trading sideways between 23.6% and 38.2% retracements of the upward move launched in October 2022. An attempt was made recently to break above the upper limit of the range but bulls failed to do so. A small pullback was launched later on and it looks to have been halted at the 50-session moving average (green line). Stock continues to trade near the upper limit of the range and should Microsoft earnings report surprise positively, an upside breakout may be a matter of time.

Source: xStation5