Microsoft to report earnings amid rising inflation and big misses by Netflix, Snap

Microsoft will announce its Q3 earnings after the bell on Tuesday. Read More...

Microsoft (MSFT) will announce its Q3 earnings after the market close on Tuesday amid concerns of rising inflation and a massive miss by fellow tech giant Netflix (NFLX).

Here’s what analysts are expecting from the company in the quarter, as compiled by Bloomberg, compared to how Microsoft performed in the same quarter last year.

Revenue: $49 billion expected versus $41.7 billion last year
Adjusted EPS: $2.19 expected versus $1.95 last year
Productivity and business processes: $15.8 billion expected versus $13.6 billion last year
Intelligent cloud: $18.9 billion expected versus $15.1 billion last year
More personal computing: $14.3 billion expected versus $13 billion last year

Microsoft’s earnings follow a huge miss by Netflix, which reported losing 200,000 users, and Snap’s (SNAP) own disappointing report in which the company missed analysts’ expectations on profits and sales.

As usual, analysts and investors are paying close attention to Microsoft’s cloud operations. The business has become Microsoft’s strongest growth driver as its customers continue to move their infrastructure online.

And while increased inflation and rising interest rates can force companies to put off major capital expenditures, Wedbush analyst Dan Ives says Microsoft should continue to perform well.

“We believe the Street’s view of moderating cloud growth on the other side of this [work from home] cycle (and a noisy Fed driven macro backdrop) is contrary to the deal activity [Microsoft] is seeing in the field,” Ives wrote in a recent note.

“While we have seen the momentum of this backdrop in the last few years, we believe deal flow looks incrementally strong…into the rest of CY22 as we estimate that Microsoft is still only ~35% through penetrating its unparalleled installed base on the cloud transition,” he added.

Microsoft is also in the process of acquiring video game giant Activision Blizzard (ATVI). The $68.7 billion deal came saddled with baggage from accusations of widespread racial and sexual discrimination and harassment at Activision.

Last week, California Governor Gavin Newsom was accused of interfering in a state investigation into Activision Blizzard’s workplace issues to the benefit of Activision Blizzard.