Enterprise E5 for Office 365 could drive expansion
So far in this series, we’ve looked at market expectations for Microsoft’s (MSFT) fiscal 2Q18 expectations. Analysts’ outlook for Microsoft stock ahead of its upcoming earnings was largely positive. Recently, Barclays raised its price target for Microsoft stock to $95 from $89.
According to Barclay’s VAR survey results, which suggest a growing spending environment, increased interest in Enterprise E5 for Office 365 could drive ARPU (average revenue per user) expansion. In our Microsoft fiscal 4Q17 earnings series, we highlighted that Office 365’s revenue growth was driven by the ARPU expansion of “emerging E5 momentum” and installed base growth across entire workloads.
Microsoft released Enterprise E5 to focus on the core functions of message, meet, and call for SME (small and medium enterprise) businesses.
Digital transformation could help Microsoft and peers
In the middle of January 2018, Nomura Securities ranked Microsoft a “buy” with a price target of $102. Gavriella Schuster, Microsoft’s corporate vice president, has estimated that “the economic value of digital transformation over the next five years is about $20 trillion.”
Ongoing digital transformation could work in favor of Microsoft and its peers. Schuster also said that increased interest among corporations to undergo partial or full digital transformations of their end-to-end operations have led to a one-of-a-kind opportunity for Microsoft and its partners “to engage with customers in new and compelling ways.”
Microsoft relies heavily on its partners. In 2017, about 95% of its total revenue of approximately $100 billion came through its partners.