Microsoft Q4 Results: Will high AI spending drive Microsoft share price lower?
Microsoft share price was down almost 4% in pre-market trading on Jul 26, 2023 after the technology major reported results for the quarter ending June 2023. The share price fell as quarterly revenues fell short of analysts’ expectations.
Microsoft’s revenues and net profit jumped, primarily taking support from its intelligent cloud segment and the company’s AI offerings, however, it failed to meet expectations.
Microsoft share prices have gained about 46.50% so far this year, according to data up to the closing session of Jul 25, 2023 and have risen about 39.33% over the past one year making it the 2nd most valuable company by market capitalization, due to the atomic rise in ChatGPT which is supported by Microsoft’s Azure.
Technology stocks have been rallying for this year driven by the AI enthusiasm in the market, with all major tech companies investing in AI technology and slowing rate hikes.
The long driven hype of AI has finally started giving results with companies posting higher results
Microsoft Q4: Historical share price performance
Microsoft Q4: Revenue
Microsoft’s revenue jumped by 8% which was below the analysts expectations. Quarterly revenue from Microsoft’s cloud computing platform Azure was below expectations due lower gross margins.
The Productivity and Business Processes segment which comprises Windows operating system, LinkedIn, Office 365 among others reported a significantly higher jump from the corresponding quarter last year .
The Personal Computing segment which comprises Xbox, Windows OEM and devices saw a dropdown in this quarter.
|June 2022||June 2023||Percentage Change|
|Total Revenue||$51.865 Billion||$56.189 Billion||+8%|
Microsoft Q4: Net Profit
Strong Net profit Growth: Microsoft posted a net profit growth of 20% as Microsoft Cloud revenue drove upwards by 15% year-on-year.
|June 2022||June 2023|
|Net Profit||$16.74 Billion||$20.1 Billion||+20%|
Microsoft Q4: Revenue Breakdown
Intelligent Cloud segment performs: There was a 15.3% increase in the Intelligent Cloud segment owing to Microsoft’s Azure. However, the growth of Azure was only 26% as compared to 40% in June 2022.
Productivity and Business Processes segment: Revenue from Productivity and Business Processes was up 10% driven by Office 365. Linkedin revenue growth stood at 5% as compared to 26% in June 2022.Microsoft 365 Consumer subscribers stood at 67 million as compared to 59.7 million in June 2022.
More personal Computing segment revenue drops: Revenue from More personal Computing segment decreased by 4% driven down by Devices and Windows OEM. The revenue from Devices and Windows OEM dropped by 20% and 12% respectively.
|June 2022||June 2023|
|Productivity and Business Processes (Office 365, Linkedin, etc.)||$16.6 Billion||$18.291 Billion|
|Intelligent Cloud (Azure and other cloud services)||$20.804 Billion||$23.993 Billion|
|More personal Computing (Windows OEM, Xbox, etc.)||$13.905 Billion||$14.461 Billion|
Microsoft Q4: Dividends
Microsoft in its earnings presentation mentioned that it returned $9.7 billion back to its shareholders in the form of stock repurchases and dividends.
The latest dividend data is given below.
|Ex/EFF DATE||CASH AMOUNT||DECLARATION DATE||PAYMENT DATE|
Microsoft Q4: Analyst View
- Wedbush has an outperform rating with a price target of $400,implying a 14.2% upside from its closing price on July 25.
- Jefferies has a buy rating with a price target of $400, implying a 14.2% upside from its closing price on July 25
- Evercore ISI has an outperform rating with a price target $400,implying a 14.2% upside from its closing price on July 25
- RBC Capital Markets has an outperform rating with a price target $390, implying a 11.42% upside from its closing price on April 25.