- Credit Suisse expects Microsoft Corp (NASDAQ:MSFT) Azure, as the “enterprise cloud,” to disproportionately benefit from this accelerated shift to the public cloud.
- It saw Azure continue to narrow the revenue gap to Amazon.com Inc (NASDAQ:AMZN) Amazon Web Services (AWS), and widen the gap to Alphabet Inc (NASDAQ:GOOG) (NASDAQ:GOOGL) Google Cloud. All of which will drive sustained growth for Microsoft and meaningful upside to consensus estimates.
- Credit Suisse noted that Azure has grown meaningfully faster than AWS when achieving revenue run-rate milestones and continued to grow faster after reaching these benchmarks than AWS. The revenue run-rate milestones included ~$500 million, ~$1.0 billion, ~$1.5 billion, ~$2.5 billion, ~$3.25 billion, ~$4.0 billion, ~$5.0 billion, and ~$7.5 billion.
- Azure has grown and continues to grow faster than both Google Cloud and Alibaba Group Holding Limited (NYSE:BABA) Alibaba Cloud when achieving similar revenue scale milestones.
- For at least the next five years, Credit Suisse forecast Microsoft to deliver mid-to-high teens revenue growth driven by mid-20% growth in Intelligent Cloud, mid-teens growth in Productivity and Business Processes, and ~2-5% growth in Windows.
- Credit Suisse also forecasts high-teens to +20% EPS and FCFPS growth driven by scale (even with accelerating investments) and ongoing share repurchases.
- Credit Suisse believes these sustained growth and profitability levels were still not adequately reflected in consensus estimates or valuation.
- Price Action: MSFT shares traded lower by 3.08% at $244.01 on the last check Thursday.
