Microsoft earnings: The world's largest software maker reports FY23 Q2 earnings (ending 31 December) tomorrow after the market close with analysts expecting revenue growth slowing to 2.3% y/y
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It's definitely an action-packed week. Major US tech stocks publish they earnings reports. Peter Garnry, Head of Equity Strategy, talks Microsoft report.
Microsoft's share price is down 29% from its peak and the equity valuation has fallen to a 3.6% free cash flow yield which is slightly above the US 10-year yield
Microsoft sees margin pressure: The world's largest software maker reports FY23 Q2 earnings (ending 31 December) tomorrow after the market close with analysts expecting revenue growth slowing to 2.3% y/y down from 20.1% y/y one year ago and down from 10.6% y/y revenue growth in the previous quarter. While the strong USD is obviously impacting foreign income the macroeconomic headwinds are also impacting customer activity. We expect the macro headwinds to impact the Windows and cloud businesses driven by lower PC sales and a slowdown in enterprise software spending. In addition to slowing revenue growth increased energy costs to its data centers and wage pressures will continue to put Microsoft's operating margin under pressure. EBITDA margin is expected to decline to 45.6% in FY23 Q2 down from 49.8% in the previous quarter and 50.7% a year ago. Analysts expect EPS of $2.30 down 6% y/y. Microsoft's share price is down 29% from its peak and the equity valuation has fallen to a 3.6% free cash flow yield which is slightly above the US 10-year yield with the difference being that these free cash flows are not fixed unlike those coupons on government bonds.
