Microsoft (MSFT) seems like an attractive shelter for investors trying to wait out a possible economic downturn, explains Rich Moroney, editor of Dow Theory Forecasts, a financial newsletter that has been published since 1946.

Azure, Microsoft’s cloud-services segment, appears capable of generating sustainable growth, even as businesses tighten their budgets. And its dominate positions in PC operating systems and business software should help insulate operations.

Encouraged by the stock’s positive reaction to a middling June-quarter report, we continue to rate Microsoft as a Focus List Buy. Per-share profits rose 3% to $2.23 for the June quarter, short of the consensus by $0.06. Revenue grew 12% to $51.87 billion, below both the consensus of $52.36 billion and Microsoft’s guidance that was revised down in early June.

Revenue for Windows operating system slipped 2%. Azure and other cloud services posted 40% higher sales, slower than the growth achieved in recent quarters. Still, Azure secured more deals worth at least $100 million than any other quarter in the company’s history.

Microsoft expects September-quarter sales to grow 9% to 11%, with the midpoint of $49.75 billion below the then-consensus of $51.40 billion. For fiscal 2023 ending June, both sales and operating income excluding currency fluctuations are expected to grow by double digits. But operating expenses are also expected to rise sharply in early fiscal 2023 before moderating. Microsoft shares rallied on the news.

Microsoft, Alphabet (GOOGL), and Amazon (AMZN) combined for a 65% slice of the $53 billion in global spending on cloud services for the March quarter — up from a 52% share four years ago.

Cloud-services revenue for these three companies is projected to climb about 29% this year, following 33% growth last year, reported The Wall Street Journal. Most cloud customers use more than one cloud service, so in July Microsoft and smaller cloud provider Oracle (ORCL) announced plans to let clients to run projects across both of their platforms.

Over the years, Microsoft has shifted its business toward a subscription model and away from its traditional perpetual licensing strategy, resulting in a steady stream of recurring revenue.

This strategy may help explain Microsoft’s run of 26 straight quarters of higher sales — with growth in the double digits for each of the last 20 quarters. Per-share profits have risen in 25 straight quarters.

The stock has slid this year, dragging down its trailing P/E ratio to 29, which hovers around its lowest level since October 2019. The median S&P 1500 Index systems-software stock has a trailing P/E ratio of 22, while Microsoft’s five-year norm is 36.

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