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Microsoft ( MSFT ) will report its fiscal Q1 earnings after the closing bell on Tuesday, providing investors and analysts a look at whether the company’s high-flying cloud computing business can offset an expected drop in PC sales.
Here’s what analysts expect from the tech giant for the quarter compared to how it performed in the same period last year.
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Income: $49.6 billion expected versus $45.3 billion last year.
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Adj. EPS: $2.31 expected versus $2.27 last year.
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Productivity and Business Processes: $16.1 billion in expected versus $15 billion last year.
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Intelligent Cloud: $20.3 billion expected versus $17 billion last year.
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More Personal Computing: $13.1 billion expected versus $13.3 billion last year.
Microsoft’s Intelligent Cloud business, which includes its Azure cloud computing platform, has been one of the cornerstones of the company’s growth over the past few years. In Q4, Microsoft’s cloud division accounted for $20.9 billion of the company’s $51.9 billion in total revenue. According to Synergy Research Group, Microsoft controlled 21% of the cloud market in Q2. Amazon held 34% of the market, while Google had 10%.
But sales slowed from their pandemic highs as revenue in the segment increased to 31% year over year in fiscal Q1 2022. Microsoft reported 26% growth in its Intelligent Cloud division in both Q2 and Q3, and 20.% growth in Q4.
“Given the macro backdrop for global enterprise and cloud spending, the Street will be watching this report and guidance closely to determine whether demand in Redmond has remained healthy for cloud spending given the gloomier backdrop surrounding the Microsoft story,” Wedbush analyst Dan Ives wrote. investor note before Microsoft’s earnings.
While Microsoft’s cloud business has remained healthy, the broader PC market has fallen dramatically compared to the explosive growth it saw during the pandemic.
According to Gartner, worldwide PC shipments decreased by 19.5% from 84.1 million units in Q3 2021 to 68 million in Q3 2022, returning to pre-pandemic levels.
“This quarter’s results could mark a historic slowdown for the PC market,” Gartner analyst Mikako Kitagawa wrote in a statement. “While supply chain disruptions have finally eased, high inventory has now become a major problem due to weak PC demand in both the consumer and business markets.”
Microsoft is not the only company feeling the impact of the decline in PC sales. Shares of Intel ( INTC ), AMD ( AMD ) and Nvidia ( NVDA ), which make chips used in computers, have fallen this year. Intel has collapsed 46% year to date, while AMD and Nvidia are down 57% and 54%, respectively.
The holiday season is generally a bright spot for computer manufacturers, as consumers shop for laptops and desktops for family members and themselves. Whether that will continue this year, however, remains to be seen.
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