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Earnings Outlook: Microsoft earnings on deck amid layoffs, recession fears: What to expect


Microsoft, which is laying off nearly 1,000 workers across multiple divisions, reports its fiscal first-quarter results after market close on Oct. 25.

With fears of a recession looming,Axios and Business Insider recently reported that the layoffs will be under 1,000 workers and will span various regions and departments. A Microsoft Corp.

spokesperson confirmed the accuracy of the reports in an email to MarketWatch.

Microsoft has around 221,000 employees worldwide, 122,000 of whom are in the United States, according to the company’s website.

READ: Microsoft to cut nearly 1,000 jobs: reports

The software giant’s first-quarter earnings also come amid foreign exchange pressure and concerns about weakness in the company’s PC business. After a pandemic-related boom, the PC market is in its “steepest” fall since data on it was first collected in the mid-90s, according to analysts.

UBS cut its Microsoft price target to $300 from $330 on Thursday as the analyst firm lowered its fiscal year 2023 estimate for the company’s Windows business and also pointed to the impact of foreign exchange.

Mizuho Securities lowered its Microsoft price target to $320 from $340 on Monday, citing foreign exchange pressure and “more pronounced” PC weakness. The analyst firm also said that its fiscal second-quarter revenue estimates for Microsoft are “meaningfully below” consensus. However, Mizuho’schecks on sales of Microsoft’s Azure cloud products were healthy overall, and did not indicate any meaningful slowdown in consumption, according to analyst Gregg Moskowitz.

OpinionTech earnings are about to dive, and there’s no life preserver in sight

Microsoft’s cloud revenue accounted for almost 50% of the company’s total revenue during its fiscal fourth-quarter results in July, and grew 28% compared with the prior year’s quarter.

Earlier this month Oppenheimer cut its Microsoft price target to $275 from $300. “Half the reduction is F/X, the other diminished demand, with the most acute pressure continuing in More Personal Computing (PCs, gaming, etc.), but also slower sales cycles in Productivity & Business Processes, and Intelligent Cloud,” wrote Oppenheimer analyst Timothy Horan. “The last quarter was only the second in five years that MSFT missed consensus, indicative of current precariousmacro overriding its historically durable franchise.”

Despite foreign exchange and PC headwinds, the software sector is expected to be one of the highlights of tech earnings season.

Microsoft earnings: It’s the forecast that matters, so be patient

Analysts surveyed by FactSet are looking for Microsoft fiscal first-quarter revenue of $49.702 billion, an increase of 9.7% on the same period last year, and earnings of $2.33 a share, or $2.31 a share, excluding items.

Microsoft’s second-quarter forecast, however, will be crucial. In recent quarters, Microsoft’s stock has fallen even after the company reported strong numbers then flipped to the green after the software maker delivers its forecast roughly two hours later.

Despite Microsoft’s fiscal fourth-quarter earnings miss in July, the company’s guidance sent the stock higher.

See Now: PC market in ‘steepest’ fall since data started being collected in mid-1990s, analysts agree

For Microsoft’s second quarter, analysts surveyed by FactSet are looking for sales of $56.197 billion and earnings of $2.56 a share.

Shares of Microsoft have fallen 29.78% in 2022, outpacing the S&P 500 Index’s

decline of 23.09%.

Of 50 analysts surveyed by FactSet, 45 have an overweight or buy rating on Microsoft, four have a hold rating and one has a sell rating.

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