Guggenheim has reiterated its Neutral rating on shares of Microsoft Corporation (NASDAQ: NASDAQ:MSFT), noting the company's recent reallocation of revenue among its key business segments.
The firm pointed out that while some of these adjustments, such as the transfer of the Enterprise Mobility + Security (EMS) service from Azure to Microsoft 365, were overdue, the lack of historical data to support these changes raises questions about their transparency.
The financial institution highlighted concerns about the potential difficulty for investors to understand the true performance of Microsoft's businesses, including Azure, Office 365 Commercial, and Windows, when the company reports its first-quarter fiscal year 2025 results.
The analyst suggested that Microsoft might claim progress according to or exceeding plans, or ask for more time if results are not up to par, a strategy that has been successful in the past.
According to the firm, Microsoft enjoys unwavering support from investors, which likely means the changes in financial reporting will be accepted without much skepticism.
The firm indicated that while some of the changes make sense from a business perspective, they could make Microsoft's business model less transparent, comparing it to a "blacker box," in part due to the absence of historical context.
In other recent news, Microsoft recently hosted a cybersecurity summit following a global IT outage in July, which was attributed to a flawed software update from cybersecurity firm CrowdStrike (NASDAQ:CRWD).
The incident, which affected approximately 8.5 million Windows devices, has sparked a broader conversation on the importance of robust cybersecurity measures. Additionally, Microsoft's President, Brad Smith, is set to testify before the U.S. Senate Intelligence Committee on election security issues alongside executives from other tech giants.
Oracle Corporation (NYSE:ORCL) has seen a surge in its cloud product revenue, which increased by 21% to reach $5.6 billion in the first quarter, following the successful integration of artificial intelligence (AI) into its cloud services. Analysts from Stifel have projected further growth for Oracle due to a rise in AI infrastructure bookings and strategic partnerships within the cloud services sector. Analysts from Bernstein have also expressed positive expectations, stating that support from major cloud providers will likely result in continued growth in cloud revenue.
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