Microsoft beats Q2 revenue and profit expectations

Overview

• Tech giant's Q2 revenue rose 17%, beating analysts' expectations

• Adjusted EPS beat analysts' expectations, rising 24%

• Company returned $12.7 bln to shareholders via dividends and buybacks, up 32% yr/yr

Outlook

• Microsoft will provide forward-looking guidance during its earnings conference call

• Company highlights strong demand for cloud services and AI technologies

• Commercial remaining performance obligation increased 110%, indicating strong future revenue potential

Result Drivers

• CLOUD REVENUE GROWTH - Microsoft Cloud revenue increased 26% to $51.5 bln, reflecting strong demand for cloud services

• AI INVESTMENTS - Investments in AI, particularly through OpenAI, boosted net income and EPS

• AZURE GROWTH - Azure and other cloud services revenue increased 39%, driving growth in the Intelligent Cloud segment

Key Details

Analyst Coverage

• The current average analyst rating on the shares is "buy" and the breakdown of recommendations is 57 "strong buy" or "buy", 3 "hold" and no "sell" or "strong sell"

• The average consensus recommendation for the software peer group is "buy"

• Wall Street's median 12-month price target for Microsoft Corp is $630.00, about 31.1% above its January 27 closing price of $480.58

• The stock recently traded at 27 times the next 12-month earnings vs. a P/E of 32 three months ago

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