January 25, 7:43 pm
Microsoft ($MFST), the multinational technology giant, recently released its earnings report which revealed mixed results. The company generated $52.7 billion in revenue, a 2% increase from the previous year, but fell short of the expected $52.9 billion forecasted by analysts. Profits also declined by 12% to $16.4 billion, raising concerns about a potential trend for the rest of the year.
The company reported its Intelligent Cloud segment grew 18% in the Q4, while its Azure services grew 31%. That's down from the previous quarter, during which Intelligent Cloud and Azure saw growth of 26% and 46%, respectively.
Despite these figures, there are many more key insights to consider when assessing the future performance of MSFT. One of the most notable points is the growing demand for Microsoft 365, which saw subscribers increase from 61.3 million to 63.2 million in the quarter. Additionally, the company's plans to integrate ChatGPT, an AI language model developed by OpenAI, into its Azure OpenAI service, Bing, and 365 suite, further solidify its position as a leading provider of AI services, something that should attract more customers in the future.
Moreover, Microsoft's strategy to sustain growth while reducing its workforce is expected to improve its margins. The company recently announced plans to cut 10,000 jobs, or 5% of its workforce (something that will initially cost the company north of $800 million), as a cost-cutting measure. Additionally, there’s not a lot of new hiring, with open job postings at less than 2000, down by 80% in just the last couple of months. In this economic downturn, Microsoft is definitely planning to more with less.
However, once the market stabilizes, Microsoft is well-positioned to retain and attract top talent, thanks to its high employee rating of 88 out of 100, indicating a positive internal culture and employee satisfaction.
More alternative data also provides valuable insights into Microsoft's performance. Web traffic to microsoft.com has remain fairly flat over the year, with an estimated 1 billion visitors each month. The company's Teams mobile app, that continues to rank high in the app stores with a 4.8 ranking, has also seen a significant increase in downloads, surpassing 100,000 downloads per day, which is five times higher than its main rival Slack.
In terms of social media, Microsoft has built a strong following, with over 12 million followers on Twitter, 4 million followers on Instagram, and almost a million followers on YouTube and TikTok on just their main channel, indicating an active effort to build its brand and expand its reach to potential customers.
The sentiment towards Microsoft has been affected by the earnings report, but it remains in the high 70s. Investors seem to appreciate Microsoft's product offerings, diversity, and leadership. Top comments on multiple stock forums talks about Microsoft products being a necessity for many business and individuals.
S&P 500 has so far outperformed MSFT starting this year but there’s growing optimism that Microsoft growth rates are at a bottom and alternative data is pointing to a strong company. In conclusion, if the fed don’t decide to crash the market, now may be a good time to invest in Microsoft. The company has strong fundamentals, a robust customer base, positive employee ratings, a strong social media presence, and and increasing number of eye balls on its business thanks to Chat GPT. However, potential investors should also take into account the slowdown in new business growth and the decrease in job postings. As with any investment, it is crucial to conduct thorough research and make an informed decision.
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