AI-Driven Growth is the Future: Microsoft Q3 Earnings

Microsoft (NASDAQ: MSFT) is set to release its Q3 2023 financial results on Tuesday, April 25, after the market closes. Here are the key points to consider ahead of the announcement:

• Analysts predict earnings per share of $2.24 and revenue of $51.11 billion for the quarter.
• Earnings are anticipated to drop 3.5% in Q2 2023 but remain relatively stable compared to Q3 2022.
• Projected sales have decreased by 3.2% from Q2 2023 but increased by 3.5% from Q3 2023.
• In the past four quarters, Microsoft has exceeded profit estimates three times and revenue forecasts twice.
• This will be the first financial report since Microsoft’s $10 billion investment in OpenAI, the AI startup behind ChatGPT, in January 2023.

Bank of America (NYSE: BAC) analysts predict a possible revenue shortfall due to declining PC sales but view this as a temporary issue. They believe Microsoft is well-positioned for AI success, thanks to its computational scale, data scale, and data management/engineering skills. BofA recently raised Microsoft’s price target from $300 to $320, citing AI-driven growth potential.

Microsoft’s stock is currently trading at $285 per share, up 19% year to date, and about 18% below its all-time high of $349 in November 2021. The company’s forward price-to-earnings ratio stands at 28.9.

Two Stocks That Could Benefit From This News

1. Nvidia (NASDAQ: NVDA): As a leading provider of GPUs, Nvidia could benefit from Microsoft’s increased focus on AI and data management.
2. Amazon (NASDAQ: AMZN): With its AWS cloud services, Amazon could see a boost in demand as Microsoft continues to grow its AI capabilities.

Two Stocks That Could Be Negatively Impacted By This News

1. IBM (NYSE: IBM): Microsoft’s growing AI focus could pose a threat to IBM’s own AI and cloud services.
2. Alphabet (NASDAQ: GOOGL): Google’s parent company could face increased competition in the AI and cloud computing market due to Microsoft’s investment in OpenAI.

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Disclaimer: Wealthy VC does not hold a position in any of the stocks, ETFs or cryptocurrencies mentioned in this article.