AI Growth And Cloud Demand Are In Focus

Microsoft
Microsoft
Inc. scheduled to report earnings after Wednesday’s close. The stock hit a record high near $468.35/share in 2024 and, as of this writing, it is currently trading near $394. The stock is prone to big moves after reporting earnings and can easily gap up if the numbers are strong. Conversely, if the numbers disappoint, the stock can easily gap down. To help you prepare, here is what the Street is expecting:

Earnings Preview

The company is expected to report a gain of $3.20/share on $68.38 billion in revenue. Meanwhile, the so-called Whisper number is a gain of $3.24/share. The Whisper number is the Street’s unofficial view on earnings.

A Closer Look At The Fundamentals

The company has grown its earnings nicely over the last several years. In 2020 the company earned $5.76/share. In 2021, the company earned $7.97. In 2022, earnings grew to $9.21 and in 2023 earnings came in at $9.81. In 2024, the company earned $11.80. Looking forward, earnings are expected to grow to $13.15 in 2025 and grow to $14.85 in 2026. Meanwhile, the stock sports a price to earnings ratio of 32 which is 1.3x the S&P 500.

A Closer Look At The Technicals

Technically, the stock has been in a downtrend since July 2024. The stock is in a correction and down around 16% from its 52-week high. After earnings, the bulls want to see the stock gap up and rally and the bears want to see it gap down and fall.

Company Profile

Microsoft Corporation develops and supports software, services, devices and solutions worldwide.

The Productivity and Business Processes segment offers office, exchange, SharePoint, Microsoft Teams, office 365 Security and Compliance, Microsoft viva, and Microsoft 365 copilot; and office consumer services, such as Microsoft 365 consumer subscriptions, Office licensed on-premises, and other office services. This segment also provides LinkedIn; and dynamics business solutions, including Dynamics 365, a set of intelligent, cloud-based applications across ERP, CRM, power apps, and power automate; and on-premises ERP and CRM applications. The Intelligent Cloud segment offers server products and cloud services, such as azure and other cloud services; SQL and windows server, visual studio, system center, and related client access licenses, as well as nuance and GitHub; and enterprise services including enterprise support services, industry solutions, and nuance professional services.

The More Personal Computing segment offers Windows, including windows OEM licensing and other non-volume licensing of the Windows operating system; Windows commercial comprising volume licensing of the Windows operating system, windows cloud services, and other Windows commercial offerings; patent licensing; and windows Internet of Things; and devices, such as surface, HoloLens, and PC accessories.

Additionally, this segment provides gaming, which includes Xbox hardware and content, and first- and third-party content; Xbox game pass and other subscriptions, cloud gaming, advertising, third-party disc royalties, and other cloud services; and search and news advertising, which includes Bing, Microsoft News and Edge, and third-party affiliates.

The company sells its products through OEMs, distributors, and resellers; and directly through digital marketplaces, online, and retail stores. The company was founded in 1975 and is headquartered in Redmond, Washington.

Pay Attention To How The Stock Reacts To The News

From where I sit, the most important trait I look for during earnings season is how the market and a specific company reacts to the news. Remember, always keep your losses small and never argue with the tape.

Disclosure: The stock has been featured on FindLeadingStocks.com