Microsoft's 2Q16 Results Will Likely Beat Analysts' Estimates

(Continued from Prior Part)

Microsoft’s $1 billion cloud donation

In this series, we discussed the market expectations for Microsoft (MSFT) in its fiscal 2Q16 results. We also briefly discussed the offerings that could safeguard Microsoft’s future. Microsoft wants to improve its stance in the cloud space. On January 19, 2016, Microsoft announced that it will make a $1 billion donation in cloud services to non-profit groups, university projects, and researchers over the next three years. Microsoft Azure, Office 365 application suite, and offerings that aid in managing mobile devices will be part of the $1 billion donation.

It’s possible that Microsoft’s move will be a stepping stone. It could attract a significant number of prospective users to its cloud platform.

Public cloud space grew 51% in 2015

According to Synergy Research Group’s recent report released in January 2016, public IaaS (infrastructure-as-a-service) and PaaS (platform-as-a-service) grew 51% in 2015. Amazon (AMZN) and Microsoft dominated. It was followed by private and hybrid cloud infrastructure services. They grew by 45%.

Synergy Research’s report stated that IBM (IBM) continued to be a top performer in the hybrid cloud space. Amazon (AMZN) ruled the overall cloud as well as the private cloud space. In the SaaS (software-as-a-service) space, Salesforce (CRM) continued to face a threat from Microsoft as the above chart shows. The report also stated that all of the segments in the cloud grew at least 16%.

Investors who want to gain exposure to Microsoft could consider investing in the SPDR S&P 500 ETF (SPY). SPY invests ~2.4% of its holdings in Microsoft. It also has an ~8% exposure to application software.

Continue to Next Part

Browse this series on Market Realist:

• Part 1 - What to Expect from Microsoft’s 2Q16 Results

• Part 2 - What Could Drive Microsoft’s Results?

• Part 4 - Microsoft Has to Bear the Brunt of the Strong Dollar