Microsoft Q3 Earnings - Room for improvement

Microsoft surpassed everyone’s expectations with their latest Q3’23 earnings, by beating estimates on their top line revenue and bottom-line net income. Although their growth rates for azured has slowed to 27% from 31%, the growth rate was still better than expectation. Nevertheless, the CEO Satya Nadella has whetted investors’ appetite during the earnings call by announcing the phase of growth for azure, which is Azure OpenAI. With the success of ChatGPT around the world, businesses are excited on the introduction of the Azure OpenAI, which would lead to further revenue growth for Microsoft.

AI-Integration of their product offerings has kept the growth story strong for Microsoft. Prior to their quarterly earnings release, shareholders were worried that Microsoft’s growth would come to a halt, and that this would sink the share price given that they are still currently priced to grow at double digits for years to come. Through this quarter earnings, Microsoft has proved that they are able to integrated AI to their current product offering successfully.

While Microsoft has produced a stellar quarter, there is still some room for improvement due to the share buybacks and dividend increase not keeping up with their growth. While it is debatable that they are increasing their R&D spend for AI, Microsoft has been generating lots of free cash flow, and they can look into providing shareholder value through higher share buybacks or increasing their dividends.

https://www.cnbc.com/2023/04/25/microsoft-msft-q3-earnings-report-2023.html