Microsoft
(MSFT)
released
earnings
after
the
market
close
on
Tuesday
night.
Here’s
what
our
analysts
thought
of
the
results.
Wide-moat
Microsoft continues
to
impress
with
solid
second-quarter
results,
including
upside
on
both
the
top
and
bottom
lines.
Even
though
management
will
not
admit
as
much,
we
continue
to
see
indicators
that
the
demand
environment
has
improved
at
least
modestly.
Artificial
intelligence
stole
the
show
again
this
quarter
as
it
contributed
600
basis
points
to
Azure
growth,
twice
the
contribution
from
just
last
quarter,
and
helped
land
larger
and
longer-term
Azure
deals.
Azure
growth,
then,
was
also
meaningfully
better
than
expected.
We
also
find
Microsoft’s
outlook
encouraging,
especially
for
Azure.
Fair
Value
Estimate
for
Microsoft
Stock
Raised
These
factors
drive
us
to
raise
our
revenue
growth
and
margin
estimates
by
approximately
one
point
each
over
the
next
five
years,
which
increases
our
fair
value
estimate
to
$420
from
$370.
Despite
this
increase,
we
see
shares
as
fairly
valued.
We
see
results
as
reinforcing
our
long-term
thesis
centering
on
the
proliferation
of
hybrid
cloud
environments
and
Azure
as
the
firm
continues
to
use
its
on-premises
dominance
to
allow
clients
to
move
to
the
cloud
at
their
own
pace.
We
center
our
growth
assumptions
around
Azure,
Microsoft
365
E5
migration,
and
traction
with
the
Power
Platform
for
long-term
value
creation.
We
also
see
AI
contributing
more
meaningfully
and
more
quickly
to
results.
For
the
December
quarter,
revenue
grew
18%
year
over
year
as
reported,
or
16%
in
constant
currency,
to
$62.02,
compared
with
the
midpoint
of
guidance
of
$60.90
billion.
We
calculate
Activision
added
about
400
basis
points
to
growth.
Relative
to
the
year-ago
period,
as
reported,
productivity
and
business
processes
grew
13%,
intelligent
cloud
grew
20%,
and
more
personal
computing
grew
19%.
Compared
with
guidance,
both
PBP
and
IC
came
in
above
the
high
end,
while
MPC
was
in
line
with
the
high
end.
Good
sales
execution,
a
hallmark
of
this
management
team,
helped
drive
strong
renewals
once
again.
Key
Morningstar
Metrics
for
Microsoft
•
Fair
Value
Estimate:
$420;
•
Current
Price:
$408.50;
•
Morningstar
Rating:
3
stars;
•
Morningstar
Economic
Moat
Rating:
Wide;
•
Morningstar
Uncertainty
Rating:
Medium.
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