25 January 2023
If you are covering Microsoft’s or ASML’s latest financial results, please find below a comment from Ben Barringer, equity research analyst at Quilter Cheviot:
Microsoft
“Microsoft’s latest trading update delivered better numbers than expected, primarily driven from the Cloud business. However, there was a noticeable slowdown during the quarter and points towards a continuing deceleration in that business.
“The PC and advertising markets continue to be weak, too, as macroeconomic concerns continue to weigh on sentiment. With recession in the US still uncertain, the path Microsoft takes from here will similarly be clouded. This partly explains recent investments in the likes of ChatGPT, which aims to cement the Cloud business’ position in the artificial intelligence space.
“Despite the weak outlook, we do believe a significant level of conservatism has been built into their guidance and we are disappointed not to see strong expectations for future earnings. Things are tough, but energy costs are improving, the dollar has weakened which will help overseas earnings and the headcount reduction will begin to take effect and help bottom lines. As a result, while the first half of the year may be tricky, we see an improving picture for Microsoft.”
ASML
“Though not comparable businesses, ASML by contrast delivered very strong numbers in its latest update, with revenues up 29%. Their guidance of revenue growth is holding up, but it has also baked some conservatism in to its margin estimates.
“It continues to have strong demand for its next generation products, as well as demand from nations building their own tech infrastructure. We are likely to see tech sovereignty remain a long-term trend as nations look for security in supply chains and move away from dependence on China and Taiwan.
“All in all, ASML remains a great company in a strong position.”
