Microsoft Q1 Earnings Preview: What’s Ahead?

The tech giant Microsoft (MSFT) is scheduled to report fiscal first-quarter 2022 earnings on October 26, after the market close.

Over the past year, shares of the software maker have jumped almost 44%, and are now trading at over $308. A solid Q1 result might propel the stock price upward, so let’s take a closer look at what analysts on the Street are expecting.

Analysts, on average, expect Microsoft to post earnings of $2.06 per share and revenues of $44 billion for fiscal Q1.

Meanwhile, the Earnings Whisper number, or the Street’s unofficial view on earnings, stands at $2.12 per share. (See MSFT Dividend Date and History on TipRanks)

Microsoft’s Prior Quarter Snapshot

Microsoft declared a record-breaking fourth quarter, with double-digit sales growth.

Revenue increased by 21% year-over-year to $46.2 billion, above analysts’ expectations of $44.1 billion, thanks to strong performance across the company’s segments.

Meanwhile, adjusted profits per share grew by 49% year-over-year to $2.17 per share, above the Street’s expectations of $1.90.

During the quarter, the business conducted a $6.2 billion share repurchase program and paid out $4.2 billion in dividends, boosting investor confidence.

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Factors to Note

Microsoft has a number of growth levers at its disposal that might have boosted the company’s results in the following quarter. Continuing momentum in the cloud computing platform – Azure, solid adoption of Microsoft Teams, and success in the gaming industry are a few growth drivers.

When it comes to Azure, this cloud platform has recently become a force to be reckoned with. Azure revenues surged 51%, or 45% on a constant-currency basis in the fiscal fourth quarter. The strong acceptance of cloud computing solutions and digital transformation is expected to drive Azure revenues in the upcoming quarter.

Second, due to the rising demand for video conferencing, Microsoft’s workspace communication solution, Teams, has seen a significant rise in usage over the past year.

To increase workplace communication and boost the user base, the company continues to add new capabilities to the Teams app. This should have aided Microsoft’s Teams software to gain popularity in the enterprise market in the quarter that’s about to be released.

Microsoft’s gaming business is another potential growth area for investors to consider. The firm has put in a lot of work to improve its standing in the video gaming industry. In the following quarter, it is expected to benefit from a rise in Xbox Live monthly active users.

To summarize, Microsoft is expected to post solid results in the upcoming quarter, thanks to a slew of growth factors.

Analyst Recommendations

Ahead of the fiscal first-quarter earnings announcement, Morgan Stanley analyst Keith Weiss reiterated a Buy rating on the stock and a price target of $331.00. This implies 7.4% upside potential to current levels.

According to Weiss, Microsoft’s stronger position in major software markets, as well as rising momentum in Cloud and Hybrid solutions, should generate “strong” top-line growth in Q1. He also expects the firm to record solid operating margins and earnings growth in Q1.

On TipRanks, Microsoft stock commands a Strong Buy consensus rating, based on 20 unanimous Buys.

As for price targets, the average MSFT price target of $340.50 implies 10.5% upside potential from the current levels.

Disclosure: At the time of publication, Shalu Saraf did not have a position in any of the securities mentioned in this article.

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