- Credit Suisse expects Microsoft Corp. MSFT Azure, as the “enterprise cloud,” will disproportionately benefit from this accelerated transition to the public cloud.
- He saw Azure continue to narrow the revenue gap for Amazon.com Inc. AMZN Amazon Web Services (AWS), and widening the gap for Alphabet Inc. GOOG GOOGL GoogleCloud. All of this will lead to sustained growth for Microsoft and a significant rise in consensus estimates.
- Credit Suisse noted that Azure grew significantly faster than AWS when achieving revenue run rate milestones and continued to grow faster after reaching those benchmarks than AWS. Revenue Execution Rate milestones included ~$500M, ~$1.0B, ~$1.5B, ~$2.5B, ~$3.25B, ~4 .0 billion, ~$5.0 billion and ~$7.5 billion.
- Azure has grown and continues to grow faster than Google Cloud and Alibaba Group Holding Limited BABA Alibaba Cloud when achieving similar income ladder milestones.
- For at least the next five years, Credit Suisse expects Microsoft to deliver mid-to-high teen revenue growth, driven by around 20% growth in smart cloud, mid-to-mid teen growth in productivity and business processes and growth of around 2-5%. in Windows.
- Credit Suisse also expects high-teens to achieve +20% EPS and FCFPS growth driven by scale (even with accelerating investments) and ongoing share buybacks.
- Credit Suisse believes that these sustained levels of growth and profitability are still not adequately reflected in consensus estimates or valuation..
- Price Action: MSFT shares traded down 3.08% to $244.01 when last checked on Thursday.
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