When Microsoft Corp reports earnings on Wednesday, analysts expect some areas of its business to take a hit from the novel coronavirus pandemic, with lower-than-expected sales in areas like advertising on its LinkedIn social network.
But analysts also expect a surge in the use of Microsoft’s cloud computing services and collaboration tools such as the Teams app “as more companies are effectively forced into the cloud” by stay-home orders, as Macquarie Capital analysts Sarah Hindlian-Bowler and Calvin Patel wrote in a research note. Analysts expect those upticks to offset some of declines and position Microsoft as well or better than its peers as the full economic impact of the pandemic becomes clearer.
“I don’t think that narrative will take a long-term hit,” Alex Zukin, managing director for software equity research at RBC Capital Markets, said in an interview. “You’re seeing investors more than willing to give a pass to short-term pockets of weakness around certain businesses.” In other segments, analysts expect revenues to be weaker than previously anticipated, including the paid use of LinkedIn by job recruiters, software tools designed for computer servers that sit in a company’s own data centers and even sales of Windows for personal computers, which were interrupted as factories in China shut down during the first three months of the calendar year.
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