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Microsoft Corp MSFT

Morningstar Rating
$410.34 −1.31 (0.32%)
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Company Report

Microsoft Earnings: Good Result Punctuated by Strong AI Demand Within Azure

Wide-moat Microsoft continues to impress with solid second-quarter results, including upside on both the top and bottom lines. Even though management will not admit as much, we continue to see indicators that the demand environment has improved at least modestly. Artificial intelligence stole the show again this quarter as it contributed 600 basis points to Azure growth, twice the contribution from just last quarter, and helped land larger and longer-term Azure deals. Azure growth, then, was meaningfully better than expected. We find Microsoft’s outlook encouraging, especially for Azure. These factors drive us to raise our revenue growth and margin estimates by approximately 1 percentage point each over the next five years, which increases our fair value estimate to $420 per share from $370. Despite this increase, we see the shares as fairly valued.

Price vs Fair Value

MSFT is trading at a 2% discount.
Price
$410.34
Fair Value
$488.00
Uncertainty
Medium
1-Star Price
$279.00
5-Star Price
$553.00
Economic Moat
Ytc
Capital Allocation
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Bulls Say, Bears Say

Bulls

Public cloud is widely considered to be the future of enterprise computing, and Azure is a leading service that benefits the evolution to first to hybrid environments, and then ultimately to public cloud environments.

Bears

Momentum is slowing in the ongoing shift to subscriptions, particularly in Office, which is generally considered a mature product.

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News

Trading Information

Previous Close Price
$411.65
Day Range
$408.97415.86
52-Week Range
$245.61420.82
Bid/Ask
$409.42 / $409.80
Market Cap
$3.05 Tril
Volume/Avg
16.3 Mil / 24.4 Mil

Key Statistics

Price/Earnings (Normalized)
37.02
Price/Sales
13.43
Dividend Yield (Trailing)
0.70%
Dividend Yield (Forward)
0.73%
Total Yield
1.29%

Company Profile

Microsoft develops and licenses consumer and enterprise software. It is known for its Windows operating systems and Office productivity suite. The company is organized into three equally sized broad segments: productivity and business processes (legacy Microsoft Office, cloud-based Office 365, Exchange, SharePoint, Skype, LinkedIn, Dynamics), intelligence cloud (infrastructure- and platform-as-a-service offerings Azure, Windows Server OS, SQL Server), and more personal computing (Windows Client, Xbox, Bing search, display advertising, and Surface laptops, tablets, and desktops).
Sector
Technology
Industry
Software - Infrastructure
Stock Style Box
Large Growth
Total Number of Employees
221,000

Competitors

Valuation

Metric
MSFT
GOOGL
ORCL
Price/Earnings (Normalized)
37.0224.7821.08
Price/Book Value
12.776.4281.24
Price/Sales
13.436.046.20
Price/Cash Flow
29.2717.5817.39
Price/Earnings
MSFT
GOOGL
ORCL

Financial Strength

Metric
MSFT
GOOGL
ORCL
Quick Ratio
1.021.940.63
Current Ratio
1.222.100.79
Interest Coverage
41.49266.753.75
Quick Ratio
MSFT
GOOGL
ORCL

Profitability

Metric
MSFT
GOOGL
ORCL
Return on Assets (Normalized)
19.91%24.48%11.39%
Return on Equity (Normalized)
39.57%35.00%11,805.30%
Return on Invested Capital (Normalized)
29.21%30.54%20.08%
Return on Assets
MSFT
GOOGL
ORCL
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