JPMorgan Says New Microsoft Survey Data Show Faster Transition To The Cloud

Recent Data

"39 percent of the survey respondents believe that the pace of transactional business worsened in Q4 as compared to Q3 whereas only 23 percent believe that it improved, suggesting a possibly faster than expected transition to the cloud/ratable business for the commercial part of the portfolio," analyst Mark Murphy wrote in a note.

Further, the survey suggested that business pace improved in the fourth quarter versus the third, albeit at a slower rate, and bookings appear in line to slightly above expectations. On average, partners were 2.3 percent above plan for FQ4, below the 4.5 percent out-performance reported by partners last quarter.

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In addition, the partners expect Windows 10 peak of activity in the enterprise in the first half of calendar 2017. Regarding to product momentum, Azure led the pack followed closely by Office 365.

Q4 Preview

Microsoft reports fourth-quarter numbers July 19. The Street expects EPS of $0.58 on revenue of $22.14 billion. Murphy also expects earnings of $0.58 a share for the fourth quarter.

"While we ascribe a lower probability for a negative surprise for Q4, we don't expect FY17 estimates to rise materially yet, as consensus considers the LinkedIn acquisition and evaluates the potential impact of a faster than expected cloud transition," Murphy highlighted.

At time of writing, shares of Microsoft were up 0.93 percent to $54.21, while Murphy maintained his price target of $50 on the stock.

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