Microsoft Earnings Preview: Surprisingly Low Implied Volatility

The stock has taken a hit from the tariffs. but the implications are yet to be seen

• Microsoft will report quarterly earnings on after the market closes April 30.
• The company is expected to report earnings per share of $3.22 on $68.44 billion in revenue.
• Both of the earnings estimates are higher than last quarter, and Microsoft has not missed earnings estimates for the past four quarters.
• Management pushing for global AI adoption, calling companies that use AI agents “frontier firms.”

Expectations are running high for Microsoft (MSFT), the next Magnificent Seven company to report earnings this quarter. It hasn’t missed earnings-per-share (EPS) or revenue estimates over the past four quarters, and projections are higher this time around. AI adoption continues to be the forefront of technological advances, and Microsoft is leaning into it.

That said, the company is expected to report EPS of $3.22 on $68.44 billion in revenue on April 30.

Along with the rest of the tech sector, MSFT stock has taken a hit from the tariffs. but the implications are still yet to be seen. Meanwhile, Alphabet (GOOG) Google just reported earnings, posting strong numbers that sent its stock was up slightly.

MSFT stock sits around $386 per share, down over $80 from recent highs in 2024.

Satya Nadella, Microsoft CEO, offered positive words in the last earnings call: “This quarter, we saw continued strength in Microsoft Cloud, which surpassed $40 billion in revenue for the first time, up 21% year-over-year. Enterprises are beginning to move from proof-of-concepts to enterprise-wide deployments to unlock the full ROI of AI. And our AI business has now surpassed an annual revenue run rate of $13 billion, up 175% year-over-year.”

Nadella also commented on the thesis behind how the company manag4s its fleet and who it alocats capital. “AI scaling laws are continuing to compound across both pre-training and inference-time compute,” he noted. “We ourselves have been seeing significant efficiency gains in both training and inference for years now."

Wow. The company amassed $13 billion in revenue, up 175% year over year (YoY). The results speak to the global adoption of AI platforms in the workplace, and we can see improved efficiency in many businessess. Microsoft is nudging users toward even more adoption, calling companies that adopt AI agents “frontier firms.”

Microsoft is calling for frontier firms

In a recent press release, Microsoft provided a lot of interesting data points that laid the groundwork for a future with widespread adoption of AI. Ultimately, companies need to grow rapidly but lack the capacity to do it in human form.

"As economic and shareholder pressure mounts for businesses, digital labor offers a new lever for growth—one that helps close the widening gap between what businesses demand and what humans can sustainably deliver.”

Our data reveals a capacity gap: 53% of leaders say productivity must increase, but 80% of the global workforce—both employees and leaders—say they lack the time or energy to do their work.

Preparing for what’s next is no longer optional. This shift demands honest conversations, intentional communication and real investment in teaching workers new skills. The most forward-looking leaders see their critical role.

• 47% of leaders list employee training as a top workforce strategy for the next 12–18 months.
• 51% of managers say AI training or will become a key responsibility for their teams within five years.
• 35% of managers are considering hiring AI trainers to guide employee adoption in the next 12–18 months.

Clearly, AI is the future of tackling "busy work" at the very least, and we see companies and even our cell phones using this tech right now. We even use it at tastylive.

It will be interesting to see what else is said on the topic during the earnings call because Microsoft is always a big proponent of AI considering the revenue it brings in for them.

Microsoft implied volatility is low for earnings

It’s somewhat surprising to me how low implied volatility is for Microsoft earnings on April 30. We have so much uncertainty with tariffs, and a lot of tech stocks have taken a nosedive. We have backwardation in the futures curve in VIX futures, which indicates extreme uncertainty in the markets.

Still, Microsoft has less than a 5% expected move for next week based on current implied volatility in the options market, and the current notional value of the stock price.

Looking at next week's options expiration, we see a +/- $18.18 expected stock price range. With MSFT stock hovering around $386 per share, this is less than a 5% earnings move in very uncertain times.

Looking to the July 2025 options expiration cycle, we see a +/- $38.89 expected stock price range. This tells us there's still plenty of implied volatility for the next few months because it reflects a 10% range up or down in MSFT stock.

Microsoft stock is down over $80 from recent highs

When the stock market tanks 20%, casual investors become daily market participants, even if it's just from the sidelines. Microsoft has been a long-standing tech stock, and implied volatility is pretty low. We could see a bigger move than expected to the downside or the tides could shift and the stock price rallies—or something in between. In any case, long-term investors may be looking for reasons to get into MSFT stock, and this earnings call could be a catalyst if numbers come in strong and the forecast is strong as well. Short term investors may be more weary, and that makes sense given the tariff implications still at the forefront of market headlines.

Bullish on Microsoft stock for earnings

If you're bullish on MSFT stock for earnings, you're looking for a double earnings beat in EPS and revenue estimates, plus a strong outlook for the rest of 2025. More clarity around AI strategy is always a bonus, but in turbulent times these stocks really need to shine to see a larger than expected move to the upside.

Bearish on Microsoft stock for earnings

If you're bearish on MSFT stock for earnings, you're looking for the first earnings miss in a year. If that happens, paired with a weak outlook for 2025, the stock will have a hard time climbing back to recent highs.

Tune in to Options Trading Concepts Live at 11 a.m. CDT on Wednesday ahead of MSFT earnings for a deeper look at options trading strategies for the announcement.

Mike Butler, tastylive director of market intelligence, has been in the markets and trading for a decade. He appears on Options Trading Concepts Live, airing Monday-Friday. @tradermikeyb  

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