Converge Technology Solutions Corp T.CTS

Alternate Symbol(s): CTSDF

Technology Information Technology Services

Converge Technology Solutions Corp. is a services-led, software-enabled, information technology (IT) and cloud solutions provider. Its global approach delivers advanced analytics, artificial intelligence (AI), application modernization, cloud platforms, cybersecurity, digital infrastructure, and digital workplace offerings to clients across various industries. It supports these solutions with advisory, implementation, and managed services across all IT vendors in the marketplace. Its segments include Converge Hybrid IT Solutions (Converge), and Portage Software-as-a-Solution (SaaS) Solutions. Converge is focused on delivering advanced analytics, application modernization, cloud, cybersecurity, digital infrastructure, digital workplace, and managed services offerings and provision of hardware and software products and solutions to clients across various industries and organizations. SaaS is focused on digital transactions between individuals, businesses, and government organizations.

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Post by retiredcfon Oct 31, 2024 8:53am

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Post# 36290313

TD Notes

MICROSOFT Q1/F25: AI REMAINS A KEY GROWTH DRIVER; PC/WINDOWS DEMAND STILL SOFT

THE TD COWEN INSIGHT

Continued solid software and cloud demand from commercial customers, aided by increasing AI adoption, should bode well for ITSPs, especially SFTC. PC/Windows demand remains weak, consistent with other recent data points, but the end of support for Windows 10 in a year (reaffirmed this quarter) could help spur a rebound in hardware spending in the coming quarters, which should benefit CTS more.

Impact: NEUTRAL read-through for Softchoice and Converge
AI tailwinds continue. MSFT reported in-line Q1/F25 revenue of $65.6B, up 16% in cc. See

TD Cowen's report here for a review of the results. Key highlights include:

Server products & cloud services revenue grew 23% y/y in cc.
- Azure & other cloud services revenue grew 34% in cc vs. guidance of 33% (MSFT
  
  updated its outlook in August following a restatement in its metrics for better visibility). MSFT stated that Azure gained market share this quarter; however the slight beat vs. guidance was helped by revenue recognition benefits.
- AI services contributed 1,200bps vs. 1,100bps last quarter. Azure growth ex-AI was 22% in cc, slightly down from 24% last quarter.
M365 Commercial products & cloud services grew 14% in cc, with M365 commercial cloud revenue in particular up 16% in cc (~90% of M365 Commercial total).
Its AI business is on track to surpass an annual run-rate of $10B next quarter, making it the fastest business in its history to reach this milestone.

Nearly 70% of the Fortune 500 use M365 Copilot, with its adoption rate faster than any other M365 suite. Key M365 Copilot wins include Vodafone (68k seats) and UBS (50k seats).

Windows OEM revenue grew 2% in cc, with management citing "execution challenges" in the commercial segment for Devices. It provided a subdued outlook for Q2, as Q1 trends are expected to continue.
Reaffirmed the end of Windows 10 support in October 2025.

Capacity availability should accelerate growth in H2. MSFT is guiding to Azure growth in Q2 of 31%-32% in cc, with similar contributions as Q1 from AI, given capacity constraints. As new capacity comes online in Q3, it is guiding for Azure growth to accelerate in H2 vs. H1.

Accelerated AI adoption drives GCP growth. Alphabet reported its Q3/F24 results on Tuesday. Google Cloud revenue of $11.4B grew ~35% y/y (vs. ~29% in Q2) and ~10% q/q. The strength was attributed to accelerated growth in GCP across AI infrastructure, general AI solutions and core GCP products. Its AI portfolio is driving deeper product adoption (~30%) with existing customers, attracting new customers, and winning larger deals. Click here for TD Cowen's take.

Converge Technology Solutions (CTS-T C$3.03) - Buy
Softchoice Corp. (SFTC C$22.00) - Buy