Microsoft (MSFT) earnings Q3 2020

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Microsoft CEO Satya Nadella speaks with the Volkswagen CEO Herbert Diess (unseen) where they unveiled their cooperation for the Volkswagen Automotive Cloud developed with Microsoft in Berlin on February 27, 2019.

Tobias Schwarz | AFP | Getty Images

Microsoft is expected to release its fiscal third-quarter earnings report after market close on Wednesday.

Analysts polled by Refinitiv expect $1.26 in adjusted earnings per share in the quarter ended March 31, on $33.66 billion in revenue, which would represent 10% growth from a year ago. However, the Covid-19 crisis and its impact on economic activity has made it more difficult for analysts to accurately predict how Microsoft and other companies will perform.

Microsoft said in February that it didn’t expect to meet the quarterly guidance it had provided for its More Personal Computing segment, which includes Windows. Chief Financial Officer Amy Hood had told analysts in January that the segment would generate revenue in the quarter of $10.75 billion to $11.15 billion.

Earlier this month IDC estimated that PC shipments fell about 10% in the quarter because of reduced supply from China, where the coronavirus had its first major outbreak. Microsoft also ended support for Windows 7 in the period. Still, Microsoft’s expansion in cloud infrastructure, collaboration products and software-as-a-service should offset some of that weakness, Goldman Sachs analysts led by Heather Bellini wrote in a report this month.

“Partners called out strength in demand for laptops (Windows OEM and Surface), collaboration tools (including Office 365 and Microsoft Teams) and public cloud (including Desktop as a Service offerings), amongst other areas,” wrote the analysts, who recommend buying the stock. “Further, partners spoke to a potential acceleration in the pace of public cloud and SaaS adoption, as companies are now being forced to confront the difficulties in managing on-premise infrastructure.”

Microsoft’s Teams communication app reached record usage levels as people shifted to working from home, and the company canceled in-person events, including the Build developer conference. Also in the quarter, Microsoft announced the acquisitions of start-ups Affirmed Networks and Npm.

Microsoft co-founder and former CEO Bill Gates said in March that he was leaving the company’s board to spend more time with the Bill & Melinda Gates Foundation. He’s since been active laying out recommendations for how the world can address the coronavirus pandemic and get to a point where economies can begin to reopen. 

Executives will discuss the results with analysts on a conference call starting at 5:30 p.m. Eastern time.

Microsoft shares are up about 12% for the year, while the S&P 500 is down almost 9%.

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