Nearby Microsoft (MSFT) results

Microsoft Corporation (MSFT) is undoubtedly benefiting from Wall Street's view that it is one of the clearest winners in the rapidly expanding market for generative AI software. Since the beginning of the year, Microsoft's stock is up 17%.

Microsoft Corporation has invested more than $10 billion in ChatGPT creator OpenAI and announced AI versions of many of its most important applications, including the Bing search engine. However, the launch of the Bing search engine didn't happen until February, and the financial impact is unlikely to play a large role in the current quarter's results.

Meanwhile, Microsoft Corporation faces the twin challenges of slowing growth in cloud services and a sharp decline in demand for personal computers in the short term, affecting not only the company's modest hardware business but also Windows, Office and other software. Another factor is declining demand for advertising, which could affect not only Bing's search engine results but also Linked In.

Consensus estimates call for revenue of $51 billion, up 3.4%, and earnings of $2.24 per share. In reporting last quarter's results, the company projected sales for its More Personal Computing segment, which includes Windows, of $11.9 billion to $12.3 billion, down 15% to 18% from a year ago.

For the June quarter, the Street's current estimates call for revenue of $54.8 billion, including $17.8 billion from productivity and business processes, $23.8 billion from intelligent cloud and $13.1 billion from More Personal Computing. Azure growth is projected at 25.5%, up slightly on a currency-adjusted basis. The consensus earnings estimate is $2.48 per share.

On a currency-adjusted basis, the company could post its slowest revenue growth in six years, Piper Sander analyst Brent Bracelin pointed out in a recent note on the earnings preview. He believes "slowing fundamental demand and declining commercial bookings trends" could dampen enthusiasm for the stock, which has risen nearly 20% so far this year. However, he argues that "the durability of earnings per share growth, the potential trough of new consumption growth rates to the cloud offshoot Azure and generative optimism in AI may overshadow growth issues". Bracelin maintains an Overweight rating on Microsoft stock with a $290 price target.

Brad Sills reiterated his buy rating on the stock last week while raising his target price from $300 to $320.