Microsoft, one of the most valuable companies in the world with a valuation of $1 trillion, is scheduled to announce its second-quarter results on January 29, 2020. Analysts are having divided consensus on whether the company will miss or exceed market expectations. The attention, however, is focused on how its Personal Computing segment will perform side by side its Intelligent Cloud Segment.
One consensus goes that Microsoft will miss a full-year 2020 estimate of $140 billion and will probably end at $134.3 billion. Still, if this estimate were to be achieved, the company will still post a 6.7% increase for its full-year revenue. The same data generated an earning consensus of $5.61 per share, still an increase from the $5.06 in 2019. With that, Microsoft's valuation is estimated to end at $158 per share, down from its current share price of $167.
Meanwhile, Wall Street expects quarterly earnings of $35.7 billion. Another estimate looks at revenue of $35.9 billion.
For context, Microsoft reported quarterly revenue of $33.1 billion and an increase of 14% from the previous quarter. The company's operating income at the time of reporting was $12.7 billion, up by 27%. Its net income was $10.7 billion, up by 21% while its diluted earnings per share were at $1.38, up by 21%. Overall, Wall Street analysts are preparing for another strong quarter from the multinational technology company.
Evercore ISI analyst Kirk Materne maintained an Outperform rating and price target of $180. Microsoft will exceed its performance in 2019 and will soar higher this year, he said in a note on January 22, which he titled "MSFT, More Popular Than Baby Yoda."
Materne said Microsoft will maintain its leading position for the next three to five years driven primarily by its cloud segment, growing annuity revenue, and an impressive balance sheet.
As for the question of whether its Microsoft's Personal Computing segment or Intelligent Cloud segment that is set to perform this year, the trend is leaning toward the Intelligent Cloud services. This, despite the latter ending with lower revenue last quarter.
For its last quarter, Microsoft's Personal Computing segment posted $11.13 billion in revenue. On the other hand. The Intelligent Cloud segment only drew $10.85 billion in revenue.
Analysts seemed to be one in saying that this year is Microsoft's cloud services' year. Microsoft's Intelligent Cloud service consists of Azure, Windows Server, SQL Server, System Center, and GitHub
Materne said Azure could grow 53% year-over-year in 2020 while office 365 is facing a long road ahead before it could transition customers to higher SKUs.
Materne is betting on Microsoft's hybrid cloud, expecting it to perform better than Amazon's. Many analysts surveyed ahead of Microsoft's earnings report on Wednesday echoed this. Forty-two percent of surveyed analysts said Microsoft's hybrid cloud is better than that of a counterpart from Amazon. This was also the opinion shared by 80 analysts surveyed by Credit Suisse with 76% of respondents betting on Azure.
