Microsoft: Boringly Reliable Double-Digit Growth In Q2 FY22

(Preview) Company Update (MSFT US) (Buy)

Summary

• Microsoft released Q2 FY22 results overnight, again showing double-digit growth, but shares first crashed 8% and then recovered to 5.4% up.

• Driven by a structural growth in technology spending and market share gains, Microsoft revenues, EBIT and EPS all grew 20%+ year-on-year.

• Growth was strong across all segments, with More Personal Computing having benefited particularly from a strong holiday season.

• Azure grew 46%, while Office and Windows lines grew mid-teens or more. Q3 is expected to again see double-digit EBIT growth.

• With shares at $304.03, we expect a total return of 59% (14.7% annualized) by June 2025, in just under 3.5 years. Buy.

Introduction

Microsoft Corporation released Q2 FY22 results overnight (Tuesday, January 25). After falling by as much as 8% at one point in post-market trading, MSFT stock is now up 5.4% in pre-market (just before 9 am EST).

Microsoft has been a core holding in our portfolio since 2014, and we initiated our Buy rating on Seeking Alpha in December …