Microsoft Earnings Preview: Will AI Bets Woo Investors?
Microsoft Earnings Preview: Will AI Bets Woo Investors?
Meanwhile, the stock’s high implied volatility rank is attracting options traders
- Microsoft’s third-quarter earnings are due on April 25.
- The company is going all-in on AI, but will it continue to woo investors?
- MSFT trades with an implied volatility rank (IVR) of 70.3.
Microsoft (MSFT) is scheduled to report 2024 third-quarter fiscal earnings on Thursday, April 25, after the markets close. Analysts expect the company to post earnings of $60.9 billion revenue and $2.83 earnings per share (EPS). Those figures would put year-over-year growth at 20% and 27%, respectively.
What are investors watching?
Investors are closely watching several components expected to drive growth in the coming years, including its cloud segment, Azure, and artificial intelligence.
Microsoft’s cloud makes up nearly half of its revenue stream, and the company has invested heavily in adding graphic processing units (GPUs) to its data centers in a bid to support AI models. Intelligent cloud revenue, also known as Azure, grew 20% from a year ago in the latest quarter. Continued growth in this space is likely but will also put a hit on the stock if it fails to impress analysts.
Microsoft has invested about $13 billion in OpenAI, the creator of ChatGPT. Microsoft recently scored a win when European Union regulators decided its OpenAI investment wasn’t an acquisition, according to a Reuters report. The development removes some legal risks hanging over the company at a time when regulators are growing more aware of the AI landscape.
Along with other AI applications, which surround nearly its entire business, investors will be keen to hear chief executive officer Satya Nadella talk about the efforts to further integrate AI into the business. Microsoft recently unveiled its copilot for security, bolstering its cybersecurity business. It’s clear Microsoft is going all-in on AI, and investors can’t get enough—the stock is up over 40% in the last 12 months. But wait, there’s more!
Nadella hired Mustafa Suleyman as Microsoft’s AI CEO in March, a move applauded by investors. Bringing on the DeepMind cofounder signaled the company’s relentless pursuit to win the AI race against Google (GOOGL) and Amazon (AMZN).
Elsewhere, the personal computing segment, which includes Microsoft’s Xbox and first party content like Activision Blizzard, are also in focus. Productivity and business processes, a segment that includes Office 365, will also be under scrutiny as a key driver of growth over the last couple of years.
Trading Microsoft earnings
Despite last week’s broad-based market selloff, MSFT is trading back above the 400 level after pivoting higher from a previously tested area of support around the 395 level. This support zone has held multiple times earlier this year, but prices remain about 5.5% below the March all-time high.
The down move injected some volatility into the stock, with the implied volatility rank (IVR) sitting at about 70. This makes options selling strategies attractive because sellers can collect some hefty premium. That said, be aware earnings can move the stock beyond the expected range, which as of today sat at about a +/- 16.41-point move, according to the April 26 strike.
Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater
For live daily programming, market news and commentary, visit tastylive or the YouTube channels tastylive (for options traders), and tastyliveTrending for stocks, futures, forex & macro.
Trade with a better broker, open a tastytrade account today. tastylive, Inc. and tastytrade, Inc. are separate but affiliated companies.
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.
tastylive content is created, produced, and provided solely by tastylive, Inc. (“tastylive”) and is for informational and educational purposes only. It is not, nor is it intended to be, trading or investment advice or a recommendation that any security, futures contract, digital asset, other product, transaction, or investment strategy is suitable for any person. Trading securities, futures products, and digital assets involve risk and may result in a loss greater than the original amount invested. tastylive, through its content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations. Investment information provided may not be appropriate for all investors and is provided without respect to individual investor financial sophistication, financial situation, investing time horizon or risk tolerance. tastylive is not in the business of transacting securities trades, nor does it direct client commodity accounts or give commodity trading advice tailored to any particular client’s situation or investment objectives. Supporting documentation for any claims (including claims made on behalf of options programs), comparisons, statistics, or other technical data, if applicable, will be supplied upon request. tastylive is not a licensed financial adviser, registered investment adviser, or a registered broker-dealer. Options, futures, and futures options are not suitable for all investors. Prior to trading securities, options, futures, or futures options, please read the applicable risk disclosures, including, but not limited to, the Characteristics and Risks of Standardized Options Disclosure and the Futures and Exchange-Traded Options Risk Disclosure found on tastytrade.com/disclosures.
tastytrade, Inc. ("tastytrade”) is a registered broker-dealer and member of FINRA, NFA, and SIPC. tastytrade was previously known as tastyworks, Inc. (“tastyworks”). tastytrade offers self-directed brokerage accounts to its customers. tastytrade does not give financial or trading advice, nor does it make investment recommendations. You alone are responsible for making your investment and trading decisions and for evaluating the merits and risks associated with the use of tastytrade’s systems, services or products. tastytrade is a wholly-owned subsidiary of tastylive, Inc.
tastytrade has entered into a Marketing Agreement with tastylive (“Marketing Agent”) whereby tastytrade pays compensation to Marketing Agent to recommend tastytrade’s brokerage services. The existence of this Marketing Agreement should not be deemed as an endorsement or recommendation of Marketing Agent by tastytrade. tastytrade and Marketing Agent are separate entities with their own products and services. tastylive is the parent company of tastytrade.
tastycrypto is provided solely by tasty Software Solutions, LLC. tasty Software Solutions, LLC is a separate but affiliate company of tastylive, Inc. Neither tastylive nor any of its affiliates are responsible for the products or services provided by tasty Software Solutions, LLC. Cryptocurrency trading is not suitable for all investors due to the number of risks involved. The value of any cryptocurrency, including digital assets pegged to fiat currency, commodities, or any other asset, may go to zero.
© copyright 2013 - 2024 tastylive, Inc. All Rights Reserved. Applicable portions of the Terms of Use on tastylive.com apply. Reproduction, adaptation, distribution, public display, exhibition for profit, or storage in any electronic storage media in whole or in part is prohibited under penalty of law, provided that you may download tastylive’s podcasts as necessary to view for personal use. tastylive was previously known as tastytrade, Inc. tastylive is a trademark/servicemark owned by tastylive, Inc.