The Shift in Microsoft’s Business Units
Microsoft recently announced significant restructuring in its business units, leading to adjustments in revenue projections across multiple segments. Noteworthy among the changes is the redistribution of Enterprise Mobility + Security (EMS) and Power BI per user revenue from Azure to Microsoft 365 (M365) Commercial Products and Cloud Services.
Analyst Evaluation of the Changes
Guggenheim analyst John DiFucci sees the adjustments as overdue but questions the lack of historical data accompanying the modifications. Despite the potential for improved performance in the latter half of FY25, DiFucci expresses concerns about the opacity of the new model and its impact on investor insight into core businesses like Azure and O365 Commercial.
Two Contrasting Interpretations
DiFucci suggests that the changes could be viewed in opposing lights – either as obfuscating underlying business fundamentals or as providing assurance for future growth. By shifting revenue allocation, Microsoft may aim to enhance growth metrics for Azure, albeit at the cost of transparency by withholding historical information.
The Analyst’s Stance and Market Consensus
DiFucci, labeling the new model a “blacker box,” maintains a Neutral rating on Microsoft with no specific price target. Contrarily, the wider analyst community, encompassing 29 positive ratings, leans towards a Strong Buy consensus. With an average price target of $501.15, investors anticipate a potential 16% premium on Microsoft shares in the coming year.
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Disclaimer: The views expressed herein represent the featured analyst’s opinion and are intended for informational purposes only. Before investing, conducting personal due diligence is strongly advised.
