Microsoft Inc. reports third-quarter earnings Thursday after the market closes on a tech-heavy day.
Here’s what to expect:
Earnings: Analysts expect Microsoft
to report earnings per share of 70 cents, up from the 62 cents per share it reported in the year-earlier period.
The Estimize consensus, made up of estimates from analysts, academics and others, is for earnings per share of 72 cents.
Microsoft beat earnings expectations the past three quarters, but missed expectations for its last third-quarter earnings report.
Revenue: FactSet analysts expect Microsoft to report revenue of $23.6 billion, up from $22.1 billion in the year-earlier period.
The Estimize consensus is for revenue of $23.3 billion.
Of the 36 ratings on FactSet, the average rating is overweight with a mean price target of $70.13.
Stock reaction: Shares of Microsoft have gained 6% in the past three months, compared to the S&P 500’s
gain of 4%. In the past month, Microsoft shares have risen 4%, outperforming the S&P 500’s gain of 1%.
What else to look for: Microsoft’s productivity and business processes segment is expected to carry the company’s results to at least meet, if not beat, earnings expectations. That segment includes Microsoft’s Office 365, which MKM Partners analysts says is building momentum with its commercial offering.
LinkedIn, which Microsoft acquired in a $26 billion transaction that closed in December, is expected to contribute $950 million to that segment for the quarter, according to MKM Partners.
This is the first full quarter that LinkedIn has been a part of Microsoft, but the company has previously said that it expected the acquisition to be 1% dilutive to its earnings per share segment in 2017 and 2018.
Stifel analysts also expect better-than-expected server transactional revenue for the quarter, thanks to Microsoft’s releases of Windows and SQL Server products. They see the intelligent cloud segment growing 8% on the strength of Azure, Microsoft’s cloud computing platform.
The device side, which includes Microsoft’s Surface laptop, may have some tougher comparisons on the consumer side, but analysts see upside from the commercial device segment. There are also rumors that Microsoft could be introducing new products at a hardware event in May.
While all of these should be positives for the stock, MKM Partners says “two wild cards” could affect the stock after earnings: fiscal 2018 guidance for 606, a new revenue rule developed by the Financial Accounting Standards Board that makes revenue hard to compare to previous quarters, and guidance for gross margins, which could be weighed down by the company’s legacy businesses.
Microsoft has consistently been returning capital to its shareholders, and analysts expect that to continue, which could help boost the stock.