Heading into Microsoft’s fiscal second-quarter report, some analysts believe the company could predict earnings gains as a result of a lower tax rate.
Microsoft will report earnings for the second quarter of its 2018 fiscal year — which ended on December 31 — after the bell on Wednesday. The company will hold a conference call with analysts at 5:30 p.m. Eastern time.
Here’s what investors are expecting:
Analysts are expecting Microsoft to give guidance of $25.51 billion in revenue for the fiscal third quarter, according to Thomson Reuters.
Meanwhile, many analysts are wondering how recent changes to U. S. tax code will impact Microsoft. Its effective tax rate could change, and some analysts believe that decreases could lead to gains in Microsoft’s earnings per share. Additionally analysts are looking for information about what Microsoft might want to do with the billions of dollars that it can repatriate from overseas following the tax changes.
There could also be a one-time tax charge for Microsoft, which could come out to as much as $20 billion, Evercore ISI analysts led by Kirk Materne wrote in a Jan. 22 note.
In the quarter Microsoft’s Azure public cloud gained share from market leader Amazon Web Services, KeyBanc analysts estimated earlier this month.
Analysts are keen to see what Microsoft has to say about Azure growth, but that isn’t the only product they’re interested in at the moment. When Nomura Instinet initiated coverage of Microsoft on Jan. 23, analysts led by Christopher Eberle pointed to further growth opportunities in commercial subscriptions to the Office 365 productivity suite, as well as the Dynamics 365 software for customer relationship management and enterprise resource planning.
In a Jan. 28 note the KeyBanc analysts said they’re expecting Microsoft to report a $21.8 billion annualized revenue run rate — the final month of the quarter, multiplied by 12 — for Commercial Cloud, which includes Azure, Office 365 and Dynamics 365, which would imply 50 percent growth.
Microsoft stock is up around 10.5 percent since the beginning of the year. In the fiscal second quarter Microsoft announced several ways in which it was incorporating artificial intelligence into its products, appointed two new board members, and acquired the team and technology behind the « living photo » app Swing. Microsoft’s Xbox One X gaming console became available during the quarter as well.
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