Microsoft to release first earnings report since announcing Activision Blizzard deal
Microsoft (MSFT) is set to report its fiscal Q2 earnings after the closing bell on Tuesday. The announcement comes just a week after the Redmond, Washington-based tech giant made headlines with news that it will acquire troubled gaming behemoth Activision Blizzard (ATVI) for $68.7 billion.
Here’s what analysts are expecting from Microsoft and how it performed in the same quarter last year.
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Revenue: $50.9 billion expected versus $43.1 billion in Q2 2021
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Earnings per share: $2.31 expected versus $2.03 in Q2 2021
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Intelligent Cloud: $18.3 billion expected versus $14.6 billion in Q2 2021
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Productivity & Business Processes: $15.9 billion versus $13.4 billion in Q2 2021
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More Personal Computing: $16.7 billion versus $15.1 billion
Microsoft, which was named Yahoo Finance’s Company of the Year for 2021 due to its impressive stock performance and cloud business, has seen its stock price slide as of late. Shares have fallen from a Nov. 15 high of $343.11 per share to $292.20 at the market open on Monday.
Year to date, Microsoft’s stock was down 14.9% as of midday Monday, while the broader S&P 500 was down 10%. Amazon, Microsoft’s biggest competitor in the all important cloud space, was down more than 16%. Over the last 12 months, however, Microsoft’s stock price is up a whopping 26%, while the S&P 500 is up just 14%. Amazon’s shares are down 15%.
Microsoft’s key growth driver has been its cloud business, which has helped supercharge the company’s stock performance over the past few years. And according to Wedbush analyst Dan Ives, that moment is expected to continue going forward despite Wall Street’s recent woes.
“We believe the Street’s view of moderating cloud growth on the other side of this [work from home] cycle (and a noisy Fed/Omicron driven macro backdrop) is contrary to the deal activity [Microsoft] is seeing in the field,” Ives wrote in a research note ahead of Microsoft’s earnings.
“With workforces expected to have a heavy remote focus for the coming years, we believe the cloud shift is just beginning to take its next stage of growth globally,” he added.
Microsoft made waves last week when it announced its plans to purchase Activision Blizzard for $68.7 billion. The deal, which is expected to close in 2023 pending regulatory approval, will make Microsoft a gaming juggernaut, thanks to Activision Blizzard’s library of games including “Call of Duty” and “World of Warcraft.”
The company will likely use its influx of gaming properties to further build out its Game Pass gaming service, which offers a cloud gaming component for $14.99 per month. Microsoft could also use Activision Blizzard’s intellectual property as a means to build out its own version of the metaverse.
It will likely be some time before those plans come to fruition, though, which means Microsoft’s chief strategy will be to bring Activision Blizzard’s games to Game Pass, and turn the service into a must-have for gamers around the world.
In the meantime, the company will have to address the cultural issues at Activision Blizzard that sparked a series of lawsuits and investigations related to alleged sexual harassment and workplace discrimination.
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