By Sam Boughedda
Credit Suisse lowered its estimates for Microsoft (NASDAQ:MSFT) on Wednesday, stating that high inventory levels and economic uncertainty are resulting in the "steepest PC decline in two decades."
"IDC and Gartner released PC shipment data for Q3 2022 showing a historic slowdown in the PC market. Gartner (sell-through) and IDC (sell-in) reported shipment declines of 19.5% and 15.0% year-over-year for Q3, respectively, versus declines of 12.6% and 15.3% year-over-year in Q2 and compared to increases of 1.0% and 3.9% in Q3 2021," wrote Credit Suisse analysts.
"In comparison, Microsoft's management provided guidance for Windows OEM revenue for the September quarter to decline in the high single-digits. Consensus estimates for Windows OEM revenue growth currently forecast an 8.0% y/y decline."
The analysts wrote that the September quarter estimates represent the steepest market decline since Gartner began tracking the PC market and the fourth consecutive quarter of year-over-year declines.
Even though the supply chain tightness and disruptions have eased, the PC market now "faces increasing inventory levels combined with weakening demand in both the consumer and enterprise," added the analysts.
"To reflect a significant deterioration in PC shipment trends, worsening macroeconomic environment, and higher FX translations headwinds, we revise our revenue/EPS estimates for FY2023/FY2024 to $216.8/$252.1 billion and $9.78/$12.27 from $221.1/$257.2 billion and $10.05/$12.49, respectively," the analysts confirmed.