Microsoft Corporation Outperforms Expectations in Q1 2023 Report

Microsoft Corporation has released its Q1 2023 report, and the results have surpassed market expectations. The company’s revenue for the quarter was $52.9 billion, a 7% YoY increase, or a 10% YoY increase without accounting for the strengthening of the dollar. This exceeded the consensus expectation of a 4% YoY growth.

EPS for the quarter was reported at $2.45, a 10% YoY increase, or a 14% YoY increase without accounting for the strengthening of the dollar. This significantly exceeded market expectations, as analysts predicted a flat net profit per share for the quarter.

Looking forward, Microsoft has given revenue guidance for the next quarter, projecting a range of $54.85 billion to $55.85 billion. The midpoint of this range, $55.35 billion, implies a 7% YoY growth, which is also higher than initial market forecasts.

Key Highlights from the Q1 2023 Report

The revenue for Microsoft’s fastest-growing sector, Azure, increased by 27% YoY. While the growth rate has slowed down from 31% YoY in the previous quarter and 46% YoY a year earlier, it still exceeded market expectations by 1 percentage point. Excluding the effect of the strengthening dollar, Azure’s YoY growth would have been 31%.

Server product and services revenue increased by 17% YoY.

Revenue for Microsoft’s office programs, LinkedIn, and Dynamics product line increased by 11% YoY, or 15% YoY without accounting for the strengthening of the dollar.

Sales of Windows licenses decreased by 28% YoY, likely attributed to a 30% YoY decline in PC shipments in the previous quarter. However, the demand for computers was slightly better than expected, according to Microsoft’s management.

Revenue from personal device sales decreased by 30% YoY.

Revenue from the Bing search engine and news increased by 10% YoY.

Revenue from the Xbox gaming division increased by 3% YoY.

Investment in Artificial Intelligence

Microsoft has been investing in developing its artificial intelligence products, with a $10 billion investment in ChatGPT developer OpenAI. The company is expected to continue to focus on expanding its AI product offerings in the future.

Market Predictions

The market consensus price target for Microsoft’s stock over the next 12 months is $305. Several analytical firms have recently adjusted their target prices for the company, as listed below.Bernstein: Changed from $280 to $322, with an “Outperform” rating

Piper Sandler: $290, with an “Overweight” rating

BMO Capital: Changed from $310 to $325, with a “Market Perform” rating

Keybanc: Changed from $316 to $335, with an “Overweight” rating

Citigroup: Changed from $282 to $332, with a “Buy” rating

B of A Securities: Changed from $300 to $320, with a “Buy” rating

Jefferies: Changed from $310 to $325, with a “Buy” rating

Table of Q1 2023 Results

Sector	YoY Growth
Azure	27%
Server products	17%
Office programs	11%
LinkedIn	11%
Dynamics	11%
Bing	10%
Xbox	3%
Windows licenses	-28%
Personal devices	-30%