Highlights

    • Q4-2023 (quarter ended June 2023) revenue rose 8% YoY, but was 3% lower than our estimate. EPS was up 21% YoY, but 5% lower than our estimate.
    • Revenue growth came primarily from server products/related cloud services (17% YoY), and office products/related cloud services (13% YoY). Growth was partially offset by weaker revenue from devices (down 20% YoY) and Windows (down 5% YoY), amid softer global PC sales (down 17% YoY; Source: gartner.com). That said, Gartner is projecting a recovery in PC sales in 2024.
    • Google (NASDAQ: GOOGL) is also integrating AI into 25 of its products. We anticipate a fierce head-to-head battle between MSFT and GOOGL as they vie for dominance in the AI space.
    • MSFT estimates Q1-FY2024 revenue and net income will grow 8%-9% vs our previous forecast of 15%-16%. As a result, we are lowering our near- term revenue and EPS projections. We are also lowering our fair value estimate by 3%, while maintaining our HOLD rating. Note that 27 of the 34 analysts covering MSFT have a BUY rating. MSFT’s forward P/E is 31.4x, which is a 47% premium over the sector average.
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