Earnings release date: Thursday, April 26
Time of day: After the closing bell
Today’s Microsoft (MSFT, $96.07) isn’t your father’s Microsoft. The Microsoft of yesteryear was primarily about selling its Windows operating system, with its Office productivity suite’s sales being a close-second priority. The business model was one of updating and upgrading previous versions of its software, starting the revenue cycle all over again.
The new business model is one of recurring and repeat revenue, where users “rent” access to its Office productivity platform, and where corporate cloud customers rather than consumers are driving revenue. CEO Satya Nadella even recently broke the legacy Windows division into separate parts amid a significant reorganization that clearly illustrated this shift to a new Microsoft era.
Investors are getting comfortable with this shift, though at times it feels a little foreign for Microsoft to work on things like artificial intelligence or the Internet of Things.
Regardless, the new mindset and model is working and should continue to work for the foreseeable future. GBH Insights’ chief strategy officer Daniel Ives said of the prior quarter’s impressive report, “Microsoft continues to be a pillar of strength on the cloud front and the Azure growth story is still in the early innings.”
The new mission is securing recurring revenue, though possibly at the expense of the occasionally explosive growth. Knowing this puts the upcoming quarterly report in perspective. The new model may be a lower-margin one than we’ve seen in the past, but there’s a lot to be said for reliable, ever-rising free cash flow. Analysts are calling for quarterly revenue of $25.8 billion and per-share profits of 85 cents. Both are up a fair amount from the year-ago comps.