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Microsoft (MSFT) will release its fourth quarter 2021 results on Tuesday after the closing bell, with analysts questioning how successful the tech giant has been in continuing to grow its cloud empire.
Here’s what analysts expect from the Windows maker in the quarter, as compiled by Bloomberg, relative to its performance in Q4 2020.
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Income: $ 44.25 billion expected against $ 38 billion in the fourth quarter of 2020
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Earnings per share: $ 1.92 expected vs. $ 1.46 in Q4 2020
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Productivity and business processes: $ 13.9 billion expected against $ 11.8 billion in the fourth quarter of 2020
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Smart cloud: $ 16.4 billion expected against $ 13.4 billion in the fourth quarter of 2020
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More personal computing: $ 13.8 billion expected against $ 12.9 billion in the fourth quarter of 2020
Microsoft’s cloud business has been key to its impressive market performance over the past several years, closing it with the company’s market capitalization closing around $ 2 trillion for the first time in its history in June. And analysts expect more activity in the fourth quarter.
“We expect another ‘beat and rise’ special from Redmond with Azure growth numbers (45% + year-on-year) that exceed expectations of the Whispers and numbers that comfortably exceed the $ 44 billion and estimate. $ 1.90 from Street, ”wrote Wedbush analyst Dan Ives in an upcoming note. of Microsoft’s revenue.
“We are seeing that transaction sizes continue to increase dramatically as enterprise-wide digital transformation changes accelerate, with CIOs all focusing on preparing their respective businesses for an architecture based on the cloud, ”he added.
The pandemic has forced many companies to develop capacity for their employees to work from home, prompting companies to spend more on cloud resources. And with more and more employees looking for work-from-home opportunities, businesses will need to continue to meet those demands, ensuring they continue to invest in cloud capabilities in the future.
Brad Sills of BofA Global Research, meanwhile, expects a 2% to 3% increase in Microsoft’s total revenue estimates for the fourth quarter, based on the continued strength of Azure and Office 365. .
While the cloud has been a key growth engine for Microsoft in recent years, the market is far from oversaturated, even with competitors like Amazon (AMZN) and Google (GOOG, GOOGL).
“We believe the cloud transition is just starting to take its next step of global growth,” Ives wrote. “We believe this disproportionately benefits Redmond’s cloud pillar because [CEO Satya Nadella] & Co. are so well positioned in its core business to further deploy its Azure / Office 365 as the backbone and artery of the cloud. “
While Microsoft’s cloud performance will certainly be the subject of the earnings announcement, analysts and investors are likely hoping to hear Nadella’s comments on the Defense Department’s recent decision to withdraw its Joint Enterprise Defense Initiative (JEDI). $ 10 billion over 10 years. Microsoft contract.
The JEDI Project was designed to modernize the communications and technological capabilities of the Pentagon for the 21st century. But he has been mired in controversy over accusations that Microsoft beat Amazon over the deal thanks to pressure from former President Donald Trump.
In a lawsuit, Amazon claimed Trump pressured DOD to choose Microsoft for the contract in order to hurt Amazon CEO Jeff Bezos. Bezos owns the Washington Post, which Trump has accused of writing “fake news” about him.
Now, the contract will be split between multiple cloud providers rather than a single company, which could benefit both Microsoft and Amazon in the long run.
Microsoft’s fourth quarter results also follow the unveiling of Windows 11, its next-generation operating system. But the company says, consistent with previous precedents, it will defer any Windows 11 license sales revenue made before general availability later this holiday season. So don’t expect an impact from the new operating system in Q4.
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