Microsoft (MSFT) will report its fiscal Q1 2022 earnings after the closing bell on Tuesday, and while the chip shortage may hurt the company's personal computing business, investors may be more interested in the performance of its all-important cloud segment.
Here's what analysts on Wall Street are expecting of Microsoft from the quarter, as compiled by Bloomberg, compared to how it performed in the same quarter last year.
Revenue: $43.93 billion expected versus $37.15 billion in Q1 2021
Earnings per share: $2.07 expected versus $1.82 in Q1 2021
Intelligent Cloud: $16.58 billion expected versus $12.98 billion in Q1 2021
Productivity & Business processes: $14.70 billion expected versus $12.31 billion in Q1 2021
More personal computing: $12.68 billion expected versus $11.84 billion in Q1 2021
Microsoft's cloud business is the company's most important segment, helping to drive the tech giant's market cap well over $2 trillion, and it continues to grow.
"We believe Azure's cloud momentum is still in its early days of playing out within the company’s massive installed base, and the Office 365 transition for both consumers and enterprises is providing growth tailwinds over the next few years," Wedbush analyst Dan Ives wrote in a note ahead of Microsoft's earnings.
A strong performance from Microsoft's cloud business will likely offset any news of a slowdown in the company's More Personal Computing segment. While Microsoft recently began rolling out its latest version of Windows, called Windows 11, the global chip shortage, which is expected to last at least until well into 2022, is limiting new PC sales.
According to research firm Gartner, while business demand for desktop PCs is strong, the chip crisis is limiting the availability of laptops. Adding to the issue, according to Gartner research director Mikako Kitagawa, is the fact that the availability of COVID-19 vaccines is causing consumers to spend on other goods outside of PCs. In other words, as people are heading back out into the world, they’re more interested in spending on things beyond computers, such as dinners out.
"Worldwide PC shipments totaled 84.1 million units in the third quarter of 2021, an increase of 1% from the third quarter of 2020, according to preliminary results by Gartner, Inc.," Kitagawa said in a press release. "As COVID-19 vaccines become more widely available, consumer and educational spending began to shift away from PCs to other priorities, slowing momentum in the market."
Microsoft's gaming segment has also been stung by the chip shortage. Demand for the company's Xbox Series X and Series S consoles has dramatically outstripped supply, leaving consumers to hunt for systems on the secondary market, where they go for hundreds over their asking prices of $499 and $299, respectively.
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