Microsoft is scheduled to report fiscal third-quarter 2019 earnings after the close of regular trading on Wednesday. Executives will discuss the results with analysts on a conference call at 5:30 p.m. Eastern time.
Here are the key numbers to watch:
- Earnings: $1.00 per share as expected by analysts, excluding certain items, according to Refinitiv.
- Revenue: $29.84 billion as expected by analysts, according to Refinitiv.
Microsoft shares are trading near a record after rallying 34% over the past year.
The company is kicking off tech earnings season, with the mega-cap companies all slated to report in the next week. Facebook's results are also coming after the bell on Wednesday, followed by Amazon on Thursday, and Alphabet and Apple early next week. Expectations are high, after the Nasdaq climbed to an intraday record on Wednesday.
Sales growth at Microsoft, which is expected to come in at over 11% in the latest quarter, is being driven by the transition to the public cloud as more large businesses offload their servers and data storage.
Azure, Microsoft's cloud infrastructure offering, is part of the commercial cloud business, which grew 48% in the fiscal second quarter, and analysts at Stifel estimated this week that the segment's annual run rate should be up another 40% to $38.5 billion. While Azure is still much smaller than rival Amazon Web Service, Stifel says it's growing faster than AWS was at a similar size.
"We continue to believe the shift to the cloud will be additive to Microsoft given a broader portfolio of products with deeper functionality as well as Microsoft's ability to enter new categories where it did not compete previously," wrote Stifel's Brad Reback, who has a "buy" rating on the stock.
Microsoft and AWS are in the last stages of competing for a $10 billion Department of Defense contract, known as JEDI, after IBM and Oracle were recently ruled out. Last week, Wedbush analysts said momentum has been moving towards Microsoft CEO Satya Nadella in his effort to catch Amazon's Jeff Bezos.
"The tide has turned significantly for MSFT on the 'game changing' $10 billion JEDI Beltway cloud deal for the Pentagon with our work in the field indicating this bake-off is now a toss-up and even odds between Bezos and Nadella vs. the slam dunk win for AWS that it appeared to be roughly a year ago," wrote Daniel Ives, an analyst at Wedbush, who recommends buying Microsoft shares. It "could represent a key positive catalyst for MSFT looking ahead when this winner likely gets announced in the summer time-frame," he wrote.
Microsoft is also benefiting from the move to cloud applications, pushing users of its traditional productivity products like Word and Excel to the cloud-based Office 365 suite. And LinkedIn, the professional-networking site that Microsoft acquired for over $26 billion in 2016, continues to grow much faster than the overall business.
Microsoft is likely to provide guidance for the fiscal fourth quarter on its earnings call Wednesday afternoon. Analysts expect revenue growth of 8.4% to $32.6 billion and per share earnings of 1.18, according to Refinitiv.
WATCH: Here's what to expect from the big tech companies' earnings
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