Microsoft (Nasdaq: MSFT) came in right in line with the Street's expectations last quarter, but investors are hoping that it will beat them this quarter. The company will unveil its latest earnings on Thursday, July 21. Microsoft develops, licenses, and supports a range of software products and services for a variety of computing devices.

What analysts say:

  • Buy, sell, or hold?: Analysts strongly back Microsoft, with 19 of 29 rating it a buy and the remainder rating it a hold. Analysts like Microsoft better than competitor IBM overall. While analysts still rate the stock a moderate buy, they are a little more optimistic about it compared with three months ago.
  • Revenue forecasts: On average, analysts predict $17.25 billion in revenue this quarter. That would represent a rise of 7.5% from the year-ago quarter.
  • Wall Street earnings expectations: The average analyst estimate is earnings of $0.58 per share. Estimates range from $0.53 to $0.63.

What our community says:
CAPS All-Stars are solidly backing the stock, with 90.1% assigning it an "outperform" rating. The community at large concurs with the All-Stars, with 87.1% giving it a rating of "outperform." Fools have embraced Microsoft and haven't been shy with their opinions lately, logging 5,117 posts in the past 30 days. Despite the majority sentiment in favor of Microsoft, the stock has a middling CAPS rating of three out of five stars.

Management:
Microsoft's profit has risen year over year by an average of 32.5%. Revenue has now gone up for three straight quarters. The company's gross margin shrank by 4.7 percentage points in the last quarter. Revenue rose 13.3% while cost of sales rose 41.5% to $3.9 billion from a year earlier.

Now let's look at how efficient management is at running the business. Traditionally, margins represent the efficiency with which companies capture portions of sales dollars. The following table shows gross, operating, and net margins over the past four quarters. 

Quarter Q3 Q2 Q1 Q4
Gross Margin 76.3% 75.8% 80.6% 80.2%
Operating Margin 34.8% 40.9% 43.9% 37%
Net Margin 31.8% 33.2% 33.4% 28.2%
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