Microsoft Q4 Earnings Preview: Analyst Says ‘Stocks Still Not Fully Factoring In … Next Wave of Cloud and AI Growth’ – Microsoft (NASDAQ:MSFT)

Among the largest companies to post quarterly profits during the trading week are Microsoft Corp MSFT investors and analysts are observing further developments in the area of ​​cloud computing and artificial intelligence.

Profit estimates: Analysts are forecasting Microsoft’s fourth-quarter revenue to be $64.36 billion, according to Benzinga Pro.

The company reported revenue of $56.19 billion in the fourth quarter of last year. Microsoft has beaten analysts’ revenue estimates in eight of the last 10 quarters, including five consecutive quarters.

Analysts expect the company to report fourth-quarter earnings per share of $2.93, compared to $2.69 in the fourth quarter last year. The company has beaten analysts’ earnings per share estimates in nine of the last 10 quarters, including seven consecutive quarters.

Also read: Microsoft’s progressive stance paves the way for gaming workers’ unions

What analysts say: One key element is the ongoing revolution in artificial intelligence and Microsoft’s growth in this sector. Wedbush analyst Dan Ives we will monitor the company’s report.

“Microsoft and Nvidia are the two best technology indicators of the pace of AI adoption in the world,” Ives said.

In a new note to investors, the analyst reiterated his “Outperform” rating and a target price of $550.

Ives said channel checks show a potentially “solid” quarter for Microsoft as the company “is in the driver’s seat” of the AI ​​wave. The analyst said cloud deal flow for Azure has strong momentum.

“The key metric will be Azure growth, with a 30% bogey street that we believe is manageable given the high level of trading activity this quarter from MSFT’s top enterprise cloud clients.”

The analyst added that over the next three years, more than 70% of Microsoft’s installed base could benefit from AI-based functionalities for enterprises and businesses.

“We definitely see this as Microsoft’s ‘iPhone Moment,’ where AI is set to change the trajectory of cloud growth at Redmond over the next few years, and these latest checks give us even more confidence in that momentum.”

Ives estimates that Copilot deployments with Microsoft customers could increase the company’s revenue by $25 billion in fiscal year 2025.

“We believe the stock still does not fully factor in what we believe is the next wave of cloud and AI growth coming to Redmond as enterprise AI use cases catalyze higher AI budget spending in 2024/2025.”

Ives said Microsoft is entering a “new growth phase” and artificial intelligence is its future.

Here are other analyst ratings for Microsoft and their price targets for July:

Piper Sandler: The Overweight rating was maintained and the target price was raised from $465 to $485.

T.D. Cowen: Buy rating maintained and target price raised from $470 to $495

Bank of America: Buy rating maintained and price target raised from $480 to $510

Mizuho: The Outperform trend was maintained and the target price was raised from $450 to $480

BMO Capital:Maintained the Outperform rating and raised the price target from $465 to $500

Argus Research: Buy rating maintained and target price raised from $475 to $526

Key things to look out for: Microsoft has been in the news a lot lately due to an outage caused by CrowdStrike Holdings CRWD which disabled Windows computers.

While Microsoft’s outage likely won’t have a major impact on customer churn, analysts may ask the company how it’s faring in the wake of this key event.

While AI and Cloud grab the headlines, the company’s gaming division led by Xbox could also be a key piece for investors to keep an eye on. Microsoft has made several gaming-related acquisitions in recent years, and a new console is reportedly coming in the next few years.

With a full fiscal year now behind us, Microsoft could provide guidance for the next fiscal year.

MSFT Price Action: Microsoft shares were up 0.34% at $426.73 at market close Monday, compared with a 52-week trading range of $309.45 to $468.35. Microsoft shares are up 14% year to date in 2024.

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