Comments from Microsoft and Others Point to Limited Coronavirus Impact on Enterprise Software

With one exception, enterprise software firms reporting or pre-announcing this week haven't indicated that the coronavirus outbreak is currently impacting demand.
Author:
Publish date:

Judging by what was reported and pre-announced this week, the coronavirus outbreak isn’t yet having a major impact on an enterprise software market that has been strongly outgrowing total IT spending in recent years.

On Wednesday afternoon, Microsoft  (MSFT) - Get Report warned that its More Personal Computing segment, which covers Windows, Surface, Xbox and Bing revenue, would fall short of a January guidance range of $10.75 billion to $11.15 billion. The company blamed the impact of supply chain disruptions on its Windows OEM revenue, which is tied to Windows licenses for new PCs, and its Surface hardware sales.

However, Microsoft reiterated guidance for its Intelligent Cloud segment, which covers its Azure cloud platform and server software license revenue, as well as its Productivity & Business Processes segment, which covers Office, Dynamics (business app) and LinkedIn revenue. And it also noted that end-customer demand for Windows remains in-line with expectations.

Disclosures made by a few other software firms this week also suggest enterprise software demand remains solid for now, even if some of the numbers shared were stronger than others.

On Tuesday afternoon, cloud CRM software giant Salesforce.com  (CRM) - Get Report beat January quarter estimates and issued solid April quarter and fiscal 2021 (ends in Jan. 2021) sales guidance. On the earnings call, departing co-CEO Keith Block said that while Salesforce is concerned about the coronavirus outbreak, it’s “not affecting” the company right now.

Elastic  (ESTC) - Get Report, which provides a software platform that has the open-source Elasticsearch search and analytics engine as its foundation, is (after getting hammered post-earnings in December) up nearly 20% after comfortably beating January quarter estimates and issuing slightly above-consensus April quarter guidance. CEO Shay Bannon said on Elastic’s earnings call that his company is “paying close attention” to the coronavirus outbreak, but didn’t give any indication that business has been significantly disrupted thus far.

Cloud storage/file-sharing platform provider Box  (BOX) - Get Report is up over 5% after beating January quarter estimates, issuing above-consensus April quarter sales guidance and issuing in-line fiscal 2021 (ends in Jan. 2021) sales guidance. On Box’s call, CEO Aaron Levie said his company hasn’t yet “seen an impact” from the coronavirus outbreak in its talks with customers.

Cloud business planning software provider Anaplan  (PLAN) - Get Report is having a rougher time: Its stock is down 20% after the company (in spite of being sales and EPS estimates) missed January quarter billings estimates. However, this shortfall was blamed on management changes that Anaplan claims weighed on deal activity in the Americas.

Nutanix  (NTNX) - Get Report, which is down 26% after issuing light April quarter sales and billings guidance, did note that the coronavirus outbreak is affecting deal activity in the Asia-Pacific region. However, Nutanix, which provides a software platform for deploying hyperconverged server/storage systems, also blamed a faster-than-expected revenue shift towards software subscriptions relative to hardware and traditional license sales. And its outlook comes at a time when enterprise hardware spending in general is under pressure.

Microsoft and Salesforce are holdings in Jim Cramer’s Action Alerts PLUS Charitable Trust Portfolio. Want to be alerted before Cramer buys or sells these stocks? Learn more now.