microsoft stock price

Microsoft Corporation’s (NASDAQ:MSFT) shares jumped after the company reported an impressive fourth quarter. Investors will now be looking forward to the first quarter updates in the next two weeks. Microsoft has seen its stock gain 38% since the beginning of the year. It has a market cap of $1.07 trillion and a price multiple of 28.

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The company managed to put in a strong performance because of the growing cloud business. Microsoft’s cloud revenue has significantly increased in recent times substantially contributing to the company’s revenue growth. Here is what investors will be keen on when the company releases its Q1 results next week:

Revenue Growth

In Q4 the company’s YoY revenue grew by 12% surpassing analyst estimate. Although it did beat analysts’ expectations it slowed compared to Microsoft’s Q3 revenue growth that was 14%.  When the company reports its Q1 results investors should be keen on top-line growth on whether or not it will continue slowing. Management outlook for the quarter indicates that Microsoft expects its revenue growth to slow down in the first quarter.

According to Microsoft CFO Amy Hood, they expect Q1 revenue to range from $31.7 to $32.4 billion. The midpoint of the projection indicates that growth will be around 10.1%. On average analysts expect revenue to be around $32.2 billion in the quarter.

Commercial Cloud Revenue

The company has generated significant revenue from its cloud business. The cloud business offers Azure, Office 365 commercial and Dynamics 365 which have been vital to the company. Microsoft saw its YoY revenue from cloud-based business grow by 39%in the fourth quarter to $11 billion.

The segment has seen its gross margin expand fast in recent times growing from 57% last year to 63% in FY2019. Gross margin form the cloud-based businesses in Q4 was around 65% relative to59% reported Q4 2018

The commercial cloud segment is growing rapidly and considering its gross margin is expanding the segment will be vital to Microsoft’s earnings growth in FY2020.

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