Microsoft Falls Following a ‘Significant Miss’ Guidance Miss. Analysts See a Choppier 2023 by

© Stocksak. Microsoft (MSFT), falls after a ‘Significant Guidance Miss, Analysts see a Choppier 2023

By Senad Karaahmetovic

Microsoft (NASDAQ) shares fell nearly 6% on Wednesday morning after the tech giant provided soft guidance for its fiscal second-quarter and lowered its 2023 revenue outlook.

Microsoft reported an EPS increase of $2.35 over the analyst estimate of $2.32. Revenue rose 11% YoY to $50.1 Billion, which was higher than the consensus estimate of $49.86 Billion. This is the lowest quarterly sales growth for Microsoft in five years.

Microsoft Azure’s sales grew 35% to $20.33 Billion, while analysts expected a 36% increase. Microsoft’s Productivity and Business Processes and Personal Computing units topped analyst views.

“In a world facing increasing headwinds, digital technology is the ultimate tailwind. In this environment, we’re focused on helping our customers do more with less, while investing in secular growth areas and managing our cost structure in a disciplined way,” said Satya Nadella, chairman and CEO of Microsoft.

Microsoft guided to FQ2 revenues of $52.85billion (at the midpoint), suggesting a 2% YoY rise on the earnings call. Analysts expected revenue of $56.05 trillion. Azure growth should slow to 37% constant currency, again lower that the 39.4% consensus.

To reflect results and guidance, Goldman Sachs analysts have lowered FY23 estimates. The MSFT shares are now at $315 per share, down from $330.

“While we revise down our FY23 estimates (to reflect headwinds in MPC revenue, Azure), we note that a majority of this stepdown pertains to cyclical parts of the business that do not cater to the strategic vision of the company and our long-term thesis… Looking beyond near-term dynamics, we remain constructive as we see the company well positioned to continue to win deals and expand its wallet share within its existing customer-base, even in a slower growth environment,” they wrote in a note.

Analysts at Stifel have reduced the price target to $290 per share from $300 per shares, but remain positive about shares.

“Not surprisingly, the uneven worldwide economy continues to buffet portions of MSFT’s business as Azure growth modestly fell short of expectations as customers continued to optimize usage for the second consecutive quarter, PC demand has been meaningfully recalibrated post the pandemic and advertising spend lags as clients move to reduce marketing budgets,” they wrote to clients.

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