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Microsoft (MSFT) Earnings Preview: Here’s What to Expect

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Microsoft is scheduled to release its second-quarter fiscal 2023 results on January 24. Investors are waiting to see how far the challenges of last quarter have affected the company’s results.

Microsoft (NASDAQ:MSFT) is set to release second-quarter fiscal 2023 results on January 24. The company had guided for slower growth in its cloud computing business in its last earnings call. Let’s take a look at what else can be expected from the results tomorrow.

The Street expects Microsoft to post earnings of $2.30 per share, which is lower than $2.48 in the prior-year period. Meanwhile, revenue expectations are pegged at $52.96 billion, representing a year-over-year jump of 2.4%.

A Look into How FQ2 Might Have Played Out

The rapid shift of workloads to the cloud has been boosting demand for Microsoft’s cloud services. Nonetheless, the company’s cloud platform, Azure, witnessed slowing growth in the September-end quarter. Tighter pockets and fears of a deeper downturn are keeping big customers low on expenditure. On account of this frugality, Microsoft guided a deceleration in its cloud computing business for the fiscal Q2.

Recently, Citi analyst Tyler Radke gave a few key insights into MSFT’s earnings performance in the fiscal Q2. Apart from the lower IT spending that we discussed in the previous point, Radke also expects weaker results from Citigroup’s reseller survey and internal checks on mixed channels to have been among the challenges in the quarter.

Layoffs Ahead

Ahead of the quarterly earnings release, Microsoft announced that it will be handing the pink slip to about 10,000 employees soon. Radke expects this downsizing to bring more challenges to the demand environment, though lesser than most peers. However, the layoffs will not impact the Q2 results and will rather reflect in the financials of the third-quarter fiscal 2023. 

Is Microsoft Stock Expected to Rise?

Despite the challenges that appear to have pressed the Q2 results, Radke is hopeful that shares have room to rise, looking at the multi-year low valuation as compared to the S&P 500. The analyst believes that earnings and revenues could hit the lowest point in Q2 before starting to recover.

Bulls are running for MSFT stock on Wall Street, with a Strong Buy consensus rating based on 26 Buys, two Holds, and one Sell. The average price target of $281.92 indicates that the stock could appreciate 17.36% over the year.

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