Microsoft (MSFT) Earnings Preview: Plenty of Upside*

*UPDATE: Microsoft exceeds whispers, raises guidance. Live coverage of conference call here.

Microsoft (MSFT) reports FQ2 earnings at 5:00 pm EST. After last quarter’s blockbuster, the Street is hoping for another blow-out–and will probably get one. The company’s outlook and commentary about the U.S. and global economy will obviously be critical for MSFT and the market as a whole.

After modelling the quarter, we believe there is upside to “consensus” revenue and EPS, as well as to the EPS whisper of $0.48. The consensus Street margin assumptions strike us as low, and a little extra leverage would drive an EPS blowout. The caveat would be strong Xbox sales, which would fire up the top line, but reduce the company’s margin.

We will cover the earnings call live and will update our Microsoft spreadsheet as soon as the numbers come out.

Consensus for key metrics:

  • Revenue of $16.0 billion (vs. guidance range of $15.6-$16.1 billion)
  • EPS of $0.46 (vs. guidance range of $0.44-$0.46 and whisper of $0.48)

Consensus revenue breakdown:

  • Client revenue: $4.3 billion, +65%
  • Server/Tools revenue: $3.5 billion, +16%
  • Online Services revenue: $850 million, +36% (driven by acquisition)
  • MBD revenue: $4.6 billion, + 31%
  • Entertainment revenue: $2.9 billion, -2% (should be upside here)

See: SAI Microsoft Financial Analysis Spreadsheet

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