Microsoft plans to report its earnings for the fourth quarter of fiscal 2020 after the market close on Wednesday. Microsoft’s earnings report will be for the three months through June, which is the second quarter of the calendar year.
As Microsoft gears up to report its earnings, the stock has soared this year. The company’s stock price has risen 34 percent in 2020. The stock has beat the S&P 500 Index, which has risen less than 1.0 percent. Microsoft stock has emerged as one of investors’ top picks in the technology sector in 2020. IBM stock rose 5 percent after it reported impressive earnings for the June quarter. However, IBM’s stock price is still down about 6 percent for the year. Oracle stock has risen about 5 percent for the year. IBM and Oracle compete with Microsoft in the business software market.
Amazon stock has jumped more than 73 percent, while the stock of Google parent Alphabet has gained 17 percent for the year. Amazon and Google are Microsoft’s main competitors in the cloud computing market.
Microsoft’s earnings expectations
Microsoft reported its results for the third quarter of fiscal 2020 on April 29. The company delivered an EPS of $1.40, which beat the consensus estimate at $1.27. The revenue rose 15 percent YoY (year-over-year) to $35 billion, which beat the consensus estimate at $34 billion. Since Microsoft’s fiscal third-quarter earnings report, the stock has climbed about 20 percent.
In the upcoming earnings report for the fiscal fourth quarter, Wall Street analysts expect Microsoft to deliver an EPS of $1.38 on revenue of $36.6 billion. In the fourth quarter of fiscal 2019, the company delivered an EPS of $1.37, which beat the consensus estimate at $1.21. The revenue of $33.7 billion rose 12 percent YoY and beat consensus estimate at $32.8 billion.
Cloud computing business
When Microsoft reports the earnings, investors will be looking at the performance of its cloud computing business. With an 18 percent global market share, Microsoft is the world’s second-largest cloud company. Amazon dominates with a 32 percent global market share.
Microsoft’s fiscal third-quarter earnings report showed that the revenue from Microsoft’s Azure cloud computing business rose 59 percent. Selling cloud services is a highly profitable business. At Amazon, cloud contributes nearly 80 percent of the profit despite accounting for less than 15 percent of the overall revenue.
As Microsoft gears up to release its earnings results, Google is actively bidding to take its market share. Currently, Google controls an 8 percent share of the global cloud market. The company is ranked third behind Amazon and Microsoft. Google aims to become the world’s top cloud company in five years or so.
Recently, Google invested $4.5 billion in Jio Platforms in a bid to bolster its cloud fortunes in India. Jio is one of Microsoft’s cloud clients.
As the rivalry intensifies, Microsoft has been pulling some of its workloads from Amazon’s cloud platform.
Microsoft stock sports a 23 percent upside from the current level
There have been reports that Microsoft wants to acquire Warner Bros’ gaming unit to bolster its videogame business.
Although Microsoft stock has rallied this year, Wall Street still thinks that it has more room to run. At $212 per share currently, the stock could rise another 23 percent to $260, according to analysts’ target prices. Several analysts have hiked their target prices before the company’s earnings report.