Microsoft (MSFT) is set to release its earnings report for the fiscal third quarter on Tuesday. The tech giant's success with generative AI has helped it stay ahead of its rivals, including Google, Amazon, and Meta, in the AI wars. However, a decline in cloud revenue and PC sales could impact its Q3 results.
According to Bloomberg data, analysts expect Microsoft's revenue to reach $51.1 billion in Q3 2023, compared to $49.3 billion in the same period last year. The adjusted earnings per share (EPS) are expected to be $2.23, just slightly higher than the $2.22 reported in Q3 2022.
The productivity and business processes segment is expected to generate $17.1 billion, up from $15.8 billion in Q3 2022. Meanwhile, the intelligent cloud segment is projected to reach $21.9 billion, compared to $19.1 billion in the same period last year. However, the More Personal Computing segment, which includes Windows sales to third-party PC makers, is expected to decline by 15.5% YoY to $12.3 billion from $14.5 billion in Q3 2022.
Microsoft has been investing heavily in OpenAI, which has helped the company lead the AI race. However, its cloud computing growth has slowed down in the last year, with revenue growth falling from 29% in Q2 2022 to 20% in Q2 2023, including the impact of currency fluctuations. Large customers pulling back on spending and lower PC sales due to pandemic-related demand have contributed to the decline.
Microsoft had also cut 10,000 positions across its various business segments earlier this year, which analysts and investors will be monitoring for its impact on the company's bottom line.
In conclusion, Microsoft's Q3 results will be closely watched as the company continues to navigate the changing technology landscape, particularly with regards to AI and cloud computing. While there are concerns about declining revenue in certain segments, Microsoft's leadership in AI may help it continue to outperform its rivals.
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