Microsoft Corp. (MSFT), whose shares have climbed more than 38% to push the company beyond the $1 trillion valuation mark, is now tied with Apple Inc. (AAPL) as the world’s most valuable company. Much of the company’s recent success has been due to the strength of its cloud-computing business and investors will be looking for signs that revenue continues to grow in that segment amid stiff competition from cloud-computing leader Amazon.com Inc. (AMZN).

What Investors are Watching For

Microsoft is set to report fiscal first quarter earnings after market close on 23 October and investors will be looking for signs that the company is continuing to attract cloud-computing clients. A major focus will be on Azure, Microsoft’s cloud-computing service, and how its sales compare to that of Amazon Web Services, the main rival. 

While the cloud is the primary focus, investors will also be looking for strength from its suite of Office products and Windows software, as well as from its other business segments like social-networking site LinkedIn as well as video-game console Xbox and affiliated gaming software.

Analyst Expectations

Analysts are expecting Microsoft’s earnings per share (EPS) to increase 8.8% from the year earlier period, according to Yahoo! Finance. That average estimate has increased from the 4.4% growth forecasted three months ago. Revenue is expected to come in 10.8% higher than the year ago period. 

In the previous quarter that ended 30 June, the company reported year-over-year revenue growth of 12% and GAAP EPS growth of 50%. Non-GAAP EPS growth, which strips out the effect of a one-time net tax benefit of $2.6 billion due to the transfer of intangible properties, came in at 21%. Microsoft’s record revenue was driven by cloud-computing sales, which were up 39% from a year ago with sales of Azure rising as much as 64%. 

Competing for the Cloud

Microsoft’s strength in productivity and operating-system software has helped it to build a solid corporate client base that is increasingly interested in moving its core computing operations to the cloud. That solid client base will be key in Microsoft’s struggle for market share against Amazon as global spending on the public cloud is expected to more than double over the next five years, according to the Wall Street Journal

Wedbush analyst Daniel Ives predicts a “solid beat across the board on both the top and bottom line as cloud strength on Azure and Office 365 continues to be the fuel in the tank,” according to Barron’s. Microsoft “is poised to win the lion’s share of the next phase of cloud deployments vs. Amazon.com (AMZN) and [Jeff] Bezos,” he added.

An Arsenal of other Key Products

Other aspects of Microsoft’s arsenal that will help to bolster overall revenue and earnings growth are LinkedIn and Xbox. While LinkedIn revenue increased by 25% and saw record levels of engagement, Xbox software and services revenue was down by 3% with overall gaming revenue declining 10%. As gaming is expected to be another huge market in coming years, Microsoft is going to want to work on turning that downward trend around.