- Microsoft Q3 2016 Earnings


So I am a little freaked out about Microsoft's earnings release on Thursday afternoon, as it's a huge chunk of my portfolio. I know, I know I need to diversify but that's a topic for another day. 

To put my energy to good use, I decided to do some armchair analysis using Intel's numbers released today as a proxy.

Assumptions

1. I am only concerning myself with the PC slowdown affecting Microsoft's numbers via their Personal Computing segment, which is almost 50% of their revenue.
2. Assuming that they are taking care of business in their Intelligent Cloud and Business and Productivity segments.
3. I am using Intel's Client Computing Group as a proxy for the Personal Computing Segment.

Revenue Growth Table (values in billions)

 Quarter Intel
Client Computing
Group
Growth over prior quarter Microsoft
Personal Computing
Group
 Growth over prior quarter Notes
 Jan-
Mar
2015
7.4   9.0  
 Apr-
Jun 2015
 7.5 Up 1.3% 8.7Down
3.3% 
 
 Jul-
Sep
2015
 8.5 Up 13% 9.4 Up
 8%
 Microsoft changed reporting structure.
 Oct-Dec 2015 8.8 Up 3.5% 12.7 Up
35%
 
 Jan-Mar 2016 7.5 Down 14% 9.1 - 9.4
 Down
28%
 Estimated by Microsoft.
Reported by Intel.
 Apr-
Jun 2016
 7.1Down 4.7%   Estimated. Intel only provides full guidance, so using that as proxy

Armchair Conclusions

1. As you can see in the red line above, Microsoft has estimated PC sales growth to slow almost double what Intel has reported.
2. Assuming the 14% decrease that Intel posted, Microsoft should be posting ~ 10.9 billion in their Personal Computing group beating expectations by ~ 1.7 billion.
3. Microsoft had factored in a stronger dollar into their estimates but the dollar has been weakening since as per Amigo Bulls, thus working in Microsoft's favor.
3. Again assuming that other groups are in line, Microsoft, at best, would crush expectations.
4. At worst, Intel's numbers should not indicate that Microsoft is going to post weak results on Thursday.

Disclosure

1. As I mentioned earlier, I have ignored too many variables to make this a solid analysis. It's just one way of looking at this so don't take this investment advice.
2. I am long MSFT.