As the global PC market weakens, Microsoft's earnings preview shows Azure and Cloud growth in the focus

As the global PC market weakens, Microsoft's earnings preview shows Azure and Cloud growth in the fo ...

After the closing of trading, Microsoft Corp. - shares fell Tuesday ahead of the tech giant's third quarter earnings, with investors likely to focus once more on Azure, Microsoft's key cloud computing offering, to mitigate slowing demand and chip shortages in the global market.

Microsoft said in late January that its intelligent cloud revenues would increase to between $18.75 billion and $19 billion in three months ending in March, with Azure revenue growth "sequently in constant currency," driven by our Azure consumption business.

Analysts are looking for a profit of $2.19 per share, a 12% rise from last year, owing to just under $50 billion of revenue.

The PC market may, however, affect Microsoft's hardware division as well as its Windows software division, bringing demand to a halt to the boom spanning the last two years.

"The PC market was solid growth during and post Covid, driven by increased personal, academic, and professional use, including work from home," said BMO Capital Markets analyst Keith Bachman, who rated the group at "outperform" with a $340 target.

"We believe that the Office franchise has little connection to the PC market," Bachman said, indicating that "there might be some impact on Windows, particularly the OEM non-Pro (consumer) segment of the market."

Due to declining users, chip shortages, and supply chain challenges, the organization's gaming division is likely to fall from epidemic levels, which is therefore putting more pressure on Azure and the broader cloud division.

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The Federal Trade Commission will reportedly look into its anticipated $69 billion acquisition of Activision Blizzard () - a video game developer, amid concerns that the acquisition would stifle competition in the $200 billion video game industry.

Microsoft will pay, according to the companies in a letter, in a deal that might see competitors scrambling to secure their position as well as their scale in the 3 billion player-strong market, as organizations to establish and monetize their subscriber bases ahead of their move into the metaverse.

A group of professionals is also likely to elaborate on the effect it will take from a country's invasion of Ukraine in late February, while "stopping many aspects of our business in Russia in accordance with a government sanctions decision," adding that it will continue to collaborate with Ukraine's cybersecurity authorities to "vert against Russian attacks."

"Given macro concerns, we are also encouraged by strong early large cap tech prints from SAP and IBM so far," said KeyBanc Capital analyst Michael Turits, who has a 'overweight' rating with a $373 price target on the stock.

"We are hesitant about Windows OEM and Gaming due to unfavourable PC shipment and GPU/gaming data," he added. The near and long-term hyperscale cloud and integrated infrastructure stack, application development platform, and evolving business applications strategy are among his topics.

Microsoft's stock was marked 0.70% down in pre-market trading, indicating an opening bell price of $278.75 each, a move that would extend the stock's year-to-date decrease to 16.8%, putting it mostly in line with the Nasdaq Composite benchmark.

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