Microsoft Q3 FY6/12 Earnings Review
+7% revenue growth says it's probably not The Great Recession
DISCLAIMER: This note is intended for US recipients only and, in particular, is not directed at, nor intended to be relied upon by any UK recipients. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Cestrian Capital Research, Inc., its employees, agents or affiliates, including the author of this note, or related persons, may have a position in any stocks, security, or financial instrument referenced in this note. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice. Companies referenced in this note or their employees or affiliates may be customers of Cestrian Capital Research, Inc. Cestrian Capital Research, Inc. values both its independence and transparency and does not believe that this presents a material potential conflict of interest or impacts the content of its research or publications.
The Machine Rolls On
Microsoft's earnings call was notable for two things. One, the high levels of confidence and energy from the CEO and CFO alike, and two, the unyielding number of AI mentions from the sellside analyst crowd.
The actual earnings were notable for three things also, none of which are AI.
One, revenue growth. Up 7% from the same quarter last year, which is very strong, particularly as (1) the guide was for 3% growth and (2) last quarter was 2% growth, so, a big acceleration vs. last quarter and vs. original guidance.
Two, operating leverage. There wasn't any. EBITDA and cashflow margins remained the same despite the growth. This isn't the end of the world but as companies like MSFT grow you do want to see it passing through into cashflow PDQ.
Three, underlying growth is slowing, as can be seen from the RPO growth.
The stock remains on course to make new all time highs in our opinion. That said we anticipate some short term weakness after the huge run up. Below, for our Premium and Pro members only, we post the numbers, valuation, longer term chart to show target price and shorter term chart to show where the stock may go next.