Microsoft (NASDAQ:MSFT) is a top stock to buy ahead of its fiscal 2024 Q4 earnings call after markets close on July 30. The company demonstrated solid growth across multiple business segments, specifically based on its expanding cloud services and AI advancements. The company’s growth trajectory has a solid record of beating earnings per share estimates.
Over the past three months, there have been 24 upward revisions for Microsoft stock. There were only six downward revisions for EPS estimates. Moreover, top-line estimates for fiscal 2024 Q4 are set at $64.4 billion. This represents a solid annual increase. Analysts’ Q1 2025 and Q2 2025 estimates further solidify this growth momentum, with expectations of $65.27 billion and $70.02 billion in those quarters.
This upward revenue trend hints at Microsoft’s fundamental capability to maintain top- and bottom-line performance. These elements strongly support buying Microsoft stock before the upcoming earnings report.
Solid Growth and AI Lead
Microsoft’s Q3 2024 performance indicates its fundamental strength and stability in the tech sector. The company recorded Q3 top-line of $61.9 billion, reflecting a 17% annual increase. Further, Microsoft Cloud’s revenue surged to $35.1 billion, up 23%, marking the company’s lead in cloud services. Artificial intelligence is rapidly integrating into its products and services, particularly through Azure and GitHub Copilot. This points to Microsoft’s strategic advantage.
Moreover, Azure’s lead reflects its expanded market share and solid expansion in large deals. The number of $100 million-plus Azure deals surged by over 80% annually, and the number of $10 million-plus deals more than doubled. This growth reflects Azure’s competitive edge and ability to attract high-value contracts, driving high top-line growth. Further, Microsoft’s AI advancements are vital to its growth strategy.
Finally, the release of new AI models, such as Phi-3, and partnerships with leading companies like G42 are expanding Azure’s capabilities and driving higher client adoption. There were over 33 thousand Azure Arc customers, up more than 2x annually. With this, Microsoft may rapidly capitalize on the booming market demand for AI-driven solutions.
Current Trends and Projections
Microsoft’s forward-looking metrics also paint a progressive picture. Consensus estimates for fiscal 2024 Q4 project an EPS of $2.94, marking a 9.3% increase annually. Similarly, top-line expectations stand at $64.4 billion, reflecting 14.6% annual growth. The general trend remains positive despite minor downward revisions in revenue estimates over the past three months. At the bottom line, Microsoft has a track to surpass earnings expectations. This reflects seven earnings beats in the past two years. This reinforces the likelihood of optimum results in the upcoming quarter.
Additionally, Microsoft’s outlook holds a clear indication of expected growth. The company anticipates top-line growth between 19% and 20% in the fourth quarter for the Intelligent Cloud segment. This is possible through continued high performance in Azure. Revenue may grow between 9% and 11% for productivity and business processes. Office 365 and LinkedIn may continue to drive forward growth. The forecast for More Personal Computing includes top-line growth of 17%. A better-than-expected performance in gaming and Windows original equipment manufacturing supports this.
Microsoft’s $14 Billion AI & Cloud Bet
Microsoft’s capital expenditures, or capex, focuses on cloud and AI infrastructure, which points to its focus on sustaining growth. For Q3, the capex was $14 billion. This reflects solid investment in scaling AI capabilities and supporting cloud demand. This high investment indicates Microsoft’s readiness to meet high computing demand and boost its edge in the cloud and AI sectors.
In short, with Microsoft’s solid performance metrics, AI capabilities, and solid growth prospects, the stock represents a top investment. One should consider buying Microsoft shares before the fiscal 2024 Q4 earnings report. Primary indicators to watch include the company’s fundamental capability to sustain its cloud growth. Moreover, monitoring the impact of AI on revenue and any updates on major contracts or partnerships is also vital.
Therefore, with a promising outlook and a history of breaching the Street’s expectations, Microsoft stock may deliver solid price returns in the short term.
On the date of publication, Yiannis Zourmpanos did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
