On Wednesday, Microsoft (NASDAQ:$MSFT) shares climbed roughly 1% higher to hit a new 52-week high. This is significant news as it is just one trading period before the software giant is set to release its Q4 earnings report.
Over the course of the past several years, the global demand for personal computers and related software has taken a turn for the worst. Of course, this puts Microsoft in a difficult situation; the Washington-based company will have to rebrand itself as a technology leader that can adapt to the times.
However, in many ways, Microsoft has done that. For starters, the software company has shifted to a “freemium” model with Windows 10, focused on the monetization of compatible apps, and offered the OS as a free upgrade. Additionally, Microsoft has evolved for the better through the rapid growth of its Azure division. Azure – Microsoft’s cloud computing service – has been growing at almost a triple-digit rate over the past year or so.
So what’s on the calendar for Microsoft this quarter? Well, according to the current Zacks Consensus Estimates, the earnings could be 71 cents per share and revenue of $24.19. If this were to happen, this would represent year-over-year growth rates of 2.5% and 17.3%.
Aside from earnings and revenue, there are numerous things investors will be looking at when Microsoft releases its reports on Thursday, July 20.
Here are 3 things to expect when looking at Microsoft’s Q4 earnings report:
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Microsoft’s Intelligent Cloud Division Will Continue to Grow
Based on NASDAQ’s exclusive consensus estimates, Microsoft’s Intelligent Cloud is set to report year-over-year growth of almost 8.3%, with unit revenues hitting $7.32 billion. In fact, last quarter estimates called for a similar growth rate, but Microsoft actually went above and beyond and delivered year-over-year unit growth of nearly 11%. This growth was on the back of a 94% improvement in the Azure division.
It’s very likely that Azure will act as the catalyst for Intelligent Cloud growth again, and if Microsoft is able to post better-than-expected results in that division, investors should be on the lookout for total Intelligent Cloud revenues to surpass estimates yet again.
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LinkedIn Will Cause the Productivity & Business Processes Unit to Go Higher
As a result of the recent acquisition of LinkedIn, Microsoft’s Productivity & Business Processes unit is positioned to swell. Based on NASDAQ’S latest consensus estimates, this unit will post quarterly revenues of $8.35 billion.
Before the LinkedIn acquisition closed, the unit brought in about $7.96 billion in the prior-year quarter. Therefore, if Microsoft is able to match estimates, there could be growth of almost 5% in that division. It’s important to note that the Productivity and Business Processes unit is closing in on Microsoft’s More Personal Computing segment as the largest division in regards to revenue.
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The More Personal Computing Division Will Fall….Again
As of right now, More Personal Computing is Microsoft’s largest division. It includes everything from hardware, search advertising, and Windows ventures. While these have been the areas the company has struggled with in the past, it is very likely that these struggles with continuing in the near-future.
NASDAQ’s current consensus estimate calls for this division to fall about 2.7% to $8.60 billion. Last quarter, the unit endured a slump of almost 7.5%, so technically this could be thought of as a slight improvement. However, this trend really reflects the transformation that Microsoft has undergone as of late.
Featured Image: twitter
