With equities getting routed today, Microsoft (MSFT +2.9%) has given back a chunk of the AH gains it saw following yesterday's FQ2 beat, but is still soundly outperforming.
By and large, the sell-side is pleased with Microsoft's enterprise strength, hardware sales, and cost controls. Credit Suisse has upped its PT to $42.50 from $40, while predicting Windows profitability and growth will improve in the next two quarters. It also expects Azure/Office 365 will generate "meaningfully higher" lifetime sales and profits than traditional licenses, in spite of near-term revenue cannibalization.
Jefferies is reiterating a Buy and $42 PT, and sees the "option value" on the Windows business (expected by the firm to decline 7.5%/year perpetually) rising following better-than-feared FQ2 numbers. But Goldman, which has been bearish since April, thinks FY14/FY15 estimates will keep dropping.
On the CC (transcript), CFO Amy Hood stated the macro environment is "a little better than [Microsoft] thought," and that enterprise Windows sales are benefiting both from Win. 7 upgrades and a shift towards more costly enterprise SKUs.
She also mentioned Microsoft was able to beat gross margin expectations in spite of a larger hardware mix by lowering costs in other areas, and claimed share gains in database (SQL Server) and systems management software (System Center).