Microsoft (MSFT.US) will report results for Q4 today after the closing bell. Similar to other big tech companies, Microsoft stock took a hit in recent months, however the scale of declines is much smaller. The market expects Microsoft to deliver a year-over-year increase in earnings on higher revenues, however this may be difficult given rising inflation and worsening macroeconomic outlook.
- According to market consensus Microsoft is expected to report a 13.8% revenue increase in Q4 to $52.3 billion, while diluted EPS should rise 5.9% from last year to $2.29. If expectations are met then the company will record a 18.6% rise in annual revenue to $199.3 billion and a 19.2% jump in EPS to $9.50.
Source: Visible Alpha
- Key metric to watch is Azure and cloud services revenue which is a key component of a company's cloud computing business, offering a comprehensive set of services to developers, IT professionals, and enterprises. Analysts expect further growth YOY, but at the slowest pace in at least over three years. In Q3 the company reported revenue growth of 46% in its Azure business, while now growth is expected to decrease to 43.1%.
- Last year Azure had approximately 22% share in this market, just after Amazon Web Services. However, competition is rising quickly, not only from Amazon or Alphabet Inc.' Google Cloud, but also from several smaller firms.
- Yesterday Wells Fargo lowered the price target for Microsoft stock due to rising inflation, higher interest rates, and the stronger dollar, which create a challenging environment for foreign exchange rates. Microsoft seems to be already aware of these factors as the company cut its financial outlook last month and limited number of open positions.
- Today's report coupled with results from other tech behemoths which will also release their quarterly figures this week will provide more hints not only regarding the tech sector but also to some extent to the broader economy. Therefore today's figures from Microsoft and Alphabet are likely to trigger bigger moves on the markets.
Microsoft (MSFT.US) stock is trading approximately 27% below its highs from November 2021. Currently the price is approaching the lower limit of the triangle formation. Should break lower occur, first support to watch lies at $241.50 and is marked with previous price reactions and 50.0% Fibonacci retracement of March 2020 upward move. On the other hand, if results surprise positively, then upward impulse towards local resistance at $267.15 may be launched. Source: xStation5
