Categories Analysis, Technology

Microsoft (MSFT) remains a good bet after mixed Q4 performance

The company ended fiscal 2022 on a weak note, with the results missing the market’s projection despite year-over-year growth

Microsoft Corporation (NASDAQ: MSFT) is reaping the benefits of adopting a business model focused on cloud services and deprioritizing its legacy software products. The strategy has helped the company retain its leadership position in the market and beat short-term challenges.

Though there are signs of growth stagnating, statistics show that Microsoft’s core business has remained resilient to the adversities and that could be the primary factor attracting investors to the company. There is strong optimism among market watchers who overwhelmingly recommend buying MSFT, which is seen gaining in double digits.

Microsoft Corporation Q4 2022 Earnings Call Transcript

“Our new Microsoft Cloud for Sovereignty helps public sector customers meet urgent compliance, security, and privacy requirements. With Azure Arc, we are meeting customers where they are enabling companies like GM, Gregg, UBS, and Uniper to run applications across on-prem edge and multi-cloud environments. We are seeing more customers move their mission-critical workloads to Azure,” said Microsoft’s CEO Satya Nadella in a recent statement.

Investing in MSFT

Weakness in PC sales and the cloud business could be a drag on Microsoft’s short-term prospects but the general sentiment is bullish, thanks to the underlying strength of the business and healthy balance sheet. The shift in business priorities will pay off in the long term, considering the strong adoption of cloud services across markets.

MSFT Q4 2022 earnings infographic

Azure Thrives

It is worth noting that Azure has remained a high-growth business despite short-term headwinds. Another promising area is the company’s video game business, if the popularity of the Xbox Series X and S consoles is any indication. From the investment perspective, income investors can expect decent gains from the company’s stable dividend. Also, the valuation became more favorable after the recent dip, creating a fresh buying opportunity.

In the near term, Windows revenues from device makers will continue to be affected by softening computer demand and factory shutdowns in China. It is estimated that unfavorable foreign exchange rates amid the global macroeconomic uncertainties will weaken profitability.  

Infographic: How Alphabet performed in Q2 2022

Microsoft ended fiscal 2022 on a mixed note, with the results missing the market’s projection despite year-over-year growth. Revenues moved up 12% to about $52 billion, while earnings rose 3% to $2.23 per share. Earnings fell short of expectations, reversing the trend seen for more than three years when quarterly profit consistently beat estimates.

Stock Performance

The management’s positive full-year guidance – predicting double-digit EBITDA growth — came as a morale booster for investors and the stock made strong gains post-earnings this week. The shares traded sharply higher on Wednesday afternoon after opening the session higher. MSFT is down 21% since the beginning of the year.


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