According to analysts, while the novel coronavirus pandemic will impact Microsoft Corp’s businesses such as revenues from advertisements on its LinkedIn social network, and a few other areas, the company is also expected to have offset that drop in business by a growth in its cloud computing services and collaboration tools such as the Teams app.
While on the overall, the tech giant is expected to report first quarter earnings well below the expectations of the market, growth in some of its business segments is also anticipated.
According to a research note by Macquarie Capital analysts Sarah Hindlian-Bowler and Calvin Patel, the surge in the company’s cloud computing services and collaboration tools business is expected “as more companies are effectively forced into the cloud” because of work from home orders by various governments in an effort to slow down the spread of the coronavirus pandemic. Analysts also expect that the growth in business of Microsoft in some of the its business areas such as cloud computing and collaboration tool with not only help the company to offset hit to its other business segment but will also place the company in a better position compared to its rivals in terms of the full economic impact of the pandemic.
According to IBES data from Refinitiv as of April 27m it is expected that the Redmond, Washington, based Microsoft will report revenues of $33.63 billion and $1.27 per share in earnings for its fiscal third quarter. In comparison the company had reported revenues of $30.5 billion and $1.14 per share earnings in the same quarter a year ago.
Microsoft’s online software for businesses and its Azure cloud computing platform, which competes with Amazon.com’s Amazon Web Services, are expected ot be the biggest drivers of the performance.
“I don’t think that narrative will take a long-term hit,” Alex Zukin, managing director for software equity research at RBC Capital Markets, said in an interview. “You’re seeing investors more than willing to give a pass to short-term pockets of weakness around certain businesses.”
In March, there was a total of 44 million users for the company’s Teams app which has in particular been a beneficiary of the stay-home orders in many countries. Macquarie’s Hindlian-Bowler and Patel expect that the adoption of Teams app will be of a permanent nature and will be higher than it would have been even as they predict that much of the growth for the company in some of its business segments has been because of the novel coronavirus pandemic and hence could fade away with workers returning back to offices.
(Adapted from Reuters.com)