![]() ![]() At a high level, both businesses look to be growing at a similar 16% growth rate. In this case, Microsoft's "Intelligent Cloud" looks to be actually slightly larger than AWS, although this is not a direct comparison due to the aforementioned reasons. Instead, the company provides data on its Azure segment including the legacy server business. Unfortunately, Microsoft doesn't break out its "Intelligent Cloud" segment into pure Azure revenue on a dollar basis. I also prefer to go direct to the source in order to track the true health of the cloud business relative to competitors. These two giants are rapidly owning the market as Google Cloud captures just 10% market share. In the first method, I will use data from Statista which indicates MS Azure has a 23% market share of the cloud market, just behind AWS which has a 32% market share. In order to work out market share, I will use two methods. Microsoft's Intelligent Cloud segment has been the main growth driver with a staggering 17% revenue growth reported or 21% on a constant currency basis. Microsoft (Q3,FY23) MS Cloud will Surpass AWS This was despite a 7% increase in operating expenses to $14.4 billion, and thus indicates strong operating leverage. The company also reported solid profitability with $22.4 billion in operating income up 9.76% year over year. The same trend can be seen on the chart I have created below, the red trendline indicates a slight uptrend which is a positive. Therefore this quarter it has started to turn around, which could be a sign of a new growth trend. However, I have created a color-coded table below which shows the slowing growth trend looks to have troughed in Q2,FY23 at 1.97% YoY. The standard growth rate has slowed down substantially from 20.09% YoY reported in Q2,FY22. Its revenue was $52.86 billion, which beat analyst forecasts by $1.83 billion and rose by 7.08% year over year or 10% on a constant currency basis. Microsoft reported solid financial results for the third quarter of the fiscal year 2023. Microsoft (Q1 FY23) Solid But Cyclical Financials In this post I'm going to break down its Q3,FY23 report, and cloud segment, before revealing my valuation model and forecasts for the stock, let's dive in. I called the bottom of Microsoft's stock price in early 2023 and it has since increased by over 26%, due to the aforementioned tailwinds and excitement around AI. In Q3,FY23, the company beat for both its top and bottom line estimates and has continued to integrate AI into many of its products exceptionally well. In addition, Microsoft owns the world's most popular professional network LinkedIn, which reported record engagement and a staggering 930 million members in the recent quarter. The company has a staggering number of dominant businesses and tailwinds including its Windows OS (~74% market share) and Microsoft Azure, which I believe has a good chance of surpassing AWS due to its faster growth rate and AI focus (50% owner of Open AI). Microsoft ( NASDAQ: MSFT) is a company that I believe could become the largest company in the world (by market capitalization) within the next few years, given my "best case" scenario outlined in my valuation model. ![]()
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