Analyst Note| Dan Romanoff, CPA |
Microsoft continues to actually benefit from coronavirus-related issues, which helped the company drive material upside compared with its revenue and EPS outlook for the quarter. Azure remains strong, while consumer-related revenue was once again nicely ahead of our expectations as the global lockdowns continued this quarter. Importantly, commercial bookings and RPO, two forward-looking metrics, both continue to grow well in excess of revenue. We remain impressed with Microsoft's ability to drive revenue and margins at this scale and we believe there is more to come on both fronts. Results continue to underscore our thesis, which centers on customer adoption of hybrid cloud environments with Azure. Microsoft continues to use its dominant position of on-premises architecture to allow customers to move to the cloud easily and at their own pace, which we believe will continue over the next five years. A variety of generally minor model refinements drive our fair value estimate to $235 from $228 per share. We still see more than 10% upside to this high-quality wide-moat name.