Microsoft Corporation, Xbox Game Pass, Cloud computing Breaking down Microsoft's earnings: Jefferies Weisfeld
Um jared does does microsoft deserve the valuation it has so listen by all accounts. It was an unbelievable quarter. I mean you’re talking about revenue at this kind of scale, 43 billion dollars in quarterly revenue up 17 year on year, and you know when you listen to what sacha and amy were talking about. The ceo and the cfo of the company they’re talking about these digital transformations that are accelerating at a very meaningful rate azor, which is amazon’s cloud uh, offering grew by 48 year on year. This quarter, it showed zero deceleration from from last quarter, and you know street and buy side was certainly bracing for for a decent deceleration and it shows uh the resiliency of this model. Amy the cfo talked about some of these pandemic uh sectors that were hit the hardest starting to recover smb starting to recover. So, at the end of the day, you know it’s it’s, very it’s, tough to make a valuation call because obviously the market’s sitting on all time highs. But when you look at uh, you look at a structural grower like this growing top line by by 17 percent. Giving you the operating leverage uh, you know the bolt case is certainly resonating here and all aspects of the business are taking off. How do you connect the dots to other companies jared in terms of the strength we saw in microsoft and where else we could see the strength or where microsoft is competing well against another company? Absolutely so, if you look at the biggest drivers to the top line, beat this quarter their windows, oem business uh, grew revenues by about one percent year on year, might not sound that much, but street was calling for about a ten percent decline.
That’S, a pretty large delta, we saw strength from intel last week. They beat revenues by two and a half billion dollars, so i think it speaks to the rest of the pc supply chain in terms of strength of the business. The other obvious sector is uh. Segment. Is uh the uh, the azure segment in terms of the cloud offering showing robust growth at 48 year on year? Uh you know i have to imagine that that uh, that bodes well for the rest of the csps, the cloud service providers, when you think of amazon and uh and google with their selective offerings. Really just you know – and i think that speaks to the critical point here when you go through you know, over the last nine months, we’ve had so much so many um digital transformations that occur occur at such a rapid pace because of covid and it’s, benefiting all Of the csps in a very significant way, hey jared it’s tim in in terms of what’s, been going on in the chip sector and we’ve. You know: we’re we’re, looking at amd after the hours, texas instruments, um and there’s. This real disparity, obviously between the function of a lot of these different chips and and really where these multiples trade bottom line, though, is that semiconductors and whether you’re looking at the smh or something that will track the entire sector, has led tech and and has led It every single time – and it seems like it kind of led us into this earnings period, which has also been extraordinary.
So what part of the semi sector are you most excited about here and what’s? You know what’s worth the multiple yeah, absolutely uh tim. So i think semi’s continue to remain my favorite sub sector within within all of tmt. Obviously, they’ve had a strong year to date run, but i think that that strength continues. When you look for recovery plays, you know all the conversations that i’m having with clients and investors are all about. How do we think about gaining exposure to the cyclical recovery and hopefully, a post covered world and that’s going to start with analog semis right, it’s, going to start with the restocking and the leverage to the industrial and automotive uh trends and you’re? Seeing that ti? Just absolutely crushed numbers this evening: uh, they grew revenues by 22 year on year, driven by automotive and industrial, and you know this is a large gdp type grower and they just posted that 22 type revenue, growth and the thing to keep in mind there is that Inventories are on the decline, so it’s sort of the perfect storm for analog semis, where you’ve got the restocking that’s occurring, because inventories are lean, reselling, uh, resales are strong and that certainly benefits the group and the other obvious sub sector. That’S benefiting right now is compute. When you think about the infrastructures that are being built out to support the work from anywhere type, lifestyle amd is certainly benefiting right. You have 53 year on year, revenue growth as their uh as their pc server and gaming.
Business uh absolutely accelerated in a pretty meaningful way: uh, partly due to uh to strong execution from the team at amd as well. But you you choose intel over amd jared. Do i have that right when you, when you look at the risk, rewards between the two? It it’s pretty interesting because the if you, if you take a step, take a step back with respect to what happened last week at intel. They beat revenues by two and a half billion dollars versus the street right. Just a massive revision uh. They accelerated their 10 nanometer and seven nanometer process technology roadmaps versus expectations uh, and they gave a q1 guide that was uh that was above uh above the street and pat gelsinger. The new incoming ceo, who is incredibly well respected, uh, came on the call and talked about uh committing themselves to the ibm model, the integrated device manufacturing type model, where they’re going to manufacture their own chips, uh for seven nanometer in 2023. So you combine all of that in the context of where the stock is trading at a 50 to 60 discount relative to the to the uh to the broader group uh, you know a lot of conversations i’m having with investors are, how do we think about just The relative risk reward uh in intel versus amd jared, always great to get your insights. Thank you. Let’S, get back to josh lipton’s got more on from the call on microsoft, uh josh, so melissa, microsoft, cfo, amy, hood, just giving guidance, and you see the stock taking another leg up in the after hours.
Let me bring that to you remember. She goes second by segment, so productivity and business processes that would be office 365, linkedin, 3.35 to 3.6 billion for q3. That is stronger than the street was looking for intelligent cloud that’s, a segment that would include azure, 14.7 to 14.95 billion again stronger than the street was forecasting and finally, more personal computing, 12.3 to 12.7 billion street was close to 11.6 billion within that segment. She certainly called out gaming said they looked for revenue growth there 40 in part, driven by those new consoles amy hood saying we have executed well in the first half of this fiscal year, melissa back to you josh. Thank you. Josh lipton stocks up five percent guy dom we don’t know if you want to comment on microsoft or jared’s choice of intel over amd. No, i understand what jared’s saying about intel. I think dan would probably agree and and by the way we still talked about it at five o’clock we’ve talked about it for a while dan talked about intel at 48, it traded up to 63 and changed so good for dan and evaluation. Intel is a much more compelling case. I totally get it i’ll just bring up texas instruments, real quick, because why not? It was a very good quarter and he mentioned the revenue growth that, if there’s a problem with texas instruments, you’re not getting the same eps growth. You had big operating margin beat, which is a really good thing, and their profit in one of their segments was significantly better than the street was looking for.
My problem with texan here is not revenue, growth, it’s, eps growth and, i think it’s getting dragged up with the rest of the chip. So, in order, if you want to play the game i’d rather amd over intel and intel over texan well, there is no game, but i guess you can play it. If you choose um tim, i don’t know where you stand on any of those three. I i i stand offended that guy played the game by himself is what i i do. I mean and, and and you know i think, it’s it’s it’s an embarrassment to us um intel over amd uh i’m long intel uh. I haven’t been happy with the path forward and and a lot of the news flow, um and – and i think texan over amd as well um, but intel over texan and and it’s really a function of both. I think the the storyline at intel is is far from exciting and bullish, but um this is still a company that’s. You know had a record uh top line year uh in the last fiscal year i mean, and and has enormous cash flow um. So there’s a lot to fix there, um they’re gon na fix it um. I think the story at texan is: is uh yeah, a little more commoditized and a higher multiple that’s a little bit more difficult to justify um relative to amd but that’s. You know, i think why we play, would you rather rather favorite chip, stock, dan um i’d say intel, and i think that you know oftentimes.
You know you hear that old, saying in the markets about uh buying low selling high. You know we’ve been conditioned over the last few years to buy high and just try to sell higher um every once in a while. You have a good opportunity to buy a unique value when the sentiment is really poor right in front of like some sort of big fundamental shift, whether it be secular or whether it be relative to execution – and i think that’s, probably where intel fits right now. So i think somewhere in the mid 50s, where the stock is right now is probably a really nice opportunity. I think you have risk to the downside of about i don’t know 10, 15 or so percent, but to the upside. I think you probably have up to 70 over the next year, or so if things start to go right under new management. Shepherd smith.