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. While much of the surge was related to the novel coronavirus and could fade as workers return to offices, Macquarie’s Hindlian-Bowler and Patel expect Teams adoption to be permanently higher than it would have been.Reporting by Stephen Nellis in San Francisco; Editing by Leslie Adler(Reuters) - 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.Analysts expect Microsoft, based in Redmond, Washington, to report $33.63 billion in revenue and earnings of $1.27 per share for its fiscal third quarter, up from $30.5 billion and $1.14 per share the year before, according to IBES data from Refinitiv as of April 27. 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.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.Sales in other units more reliant on large one-time deals like on-premises server software could be depressed for months as businesses put non-essential spending on the back burner. Microsoft posted the first quarter of its 2020 financial results today, reporting revenue of $33.1 billion and a net income of $10.7 billion. Microsoft is dancing a rather intricate dance atop a very fine line.Even now, Microsoft is further blurring the lines of where Xbox stands as it shifts focus from pure console sales to more arbitrary usage stats and championing Xbox Live Gold subscriptions.Whether or not the company can continue to make the gains in the cloud that its Windows revenues are losing, is entirely up to how well it pushes Azure and Office in conjunction with market influences. After hitting supply shortages, for example, laptop orders have rebounded as companies and consumers bought machines to work from home, an impact that could show in Microsoft’s fourth-quarter earnings report.“The revenue stream for Microsoft is extremely sticky,” Zukin said.“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. Microsoft (NASDAQ:MSFT) is an incredibly lucrative company. “You’re seeing investors more than willing to give a pass to short-term pockets of weakness around certain businesses.” But much of Microsoft’s revenue has shifted to subscription or consumption-based billing, which should soften the effect. The biggest drivers will remain Microsoft’s Azure cloud computing platform, which competes with Amazon.com’s Amazon Web Services, and its online software for businesses.Some of those revenue streams could spring back. But much of Microsoft’s revenue has shifted to subscription or consumption-based billing, which should soften the effect.The Teams app, in particular, has benefited from stay-home orders in many countries, hitting 44 million users last month. As PC sales continue to bottom out, and large businesses are preferring to combine Windows 7 with cloud-based programs and services that increasingly interoperate with mobile devices, the necessity of a new desktop operating system from Microsoft has lessened.
“The revenue stream for Microsoft is extremely sticky,” Zukin said. Revenue is up 14 per cent, and net income has increased by 21 per cent. IMPORTANT NOTICE TO USERS (summary only, click here for full text of notice); All information is unaudited unless otherwise noted or accompanied by an audit opinion and is subject to the more comprehensive information contained in our SEC reports and filings.