Analyst Note
| Dan Romanoff, CPA |Wide-moat Microsoft continues to benefit from digital transformation efforts at enterprise customers, which once again helped the company drive material upside compared with its revenue and EPS outlook for the quarter. Second-quarter guidance was solidly above FactSet consensus as well. Azure and commercial related demand was robust by any measure, and gaming and Windows were strong even as supply constraints for PCs and Surface tablets remain challenging. We see a slowdown in remaining performance obligation, or RPO, growth and commercial bookings, two forward-looking metrics, as driven by large Azure deals in the prior year period and not a reflection of deteriorating demand. Microsoft remains impressive in its ability to drive both growth and margins at scale and think there is more to come on both fronts. We see results as reinforcing our thesis centering on the proliferation of hybrid cloud environments and Azure as the firm continues to use its on-premises dominance to allow customers to move to the cloud easily and at their own pace--a trend we believe will continue over the next five years. Quarterly strength and good guidance drive our fair value estimate to $345 from $325 per share and we continue to see upside to this high-quality name.