Microsoft Inc. releases its Q1 results as the earnings season gets fully underway.
The stock has bottomed with the recent low in stock indices and will look to retrace some recent losses.
MSFT – Daily Chart
MSFT has gotten above the $240 mark, and the $250 level provides the resistance for a move back to $260. If the stock can get through these levels, the target is $280 or higher.
One of the headwinds for tech stocks this year has been the surging dollar which has dented earnings due to offshore foreign exchange effects. Microsoft has the most prominent software revenues in the world, but analysts expect a growth slowdown. The company is likely to say that earnings per share rose 1.3% for the year, while revenue shows a 9.3% gain to almost $50 billion.
Another problem for Microsoft was a continued slowdown in PC sales. The pandemic led to a change in working conditions, and sales increased for home and hybrid workers. That has since reversed, and workers have headed back to the office.
The company has seen strength in recent quarters from its Cloud segment, including the Azure platform. However, analysts also expect slower growth for the cloud, which will be related to unemployment and slower investment due to inflation.
The cloud business could be critical to the stock market rally this week as any slowdown in the cloud at Microsoft will probably be passed over to its rivals, including Amazon Web Services and Alphabet’s Google Cloud.
The cloud could still surprise investors after management was bullish on the Q4 earnings into the end of June.
“In a dynamic environment, we saw strong demand, took a share, and increased customer commitment to our cloud platform. Commercial bookings grew 25%, and Microsoft Cloud revenue was $25 billion, up 28% year over year,” they said. “As we begin a new fiscal year, we remain committed to balancing operational discipline with continued investments in key strategic areas to drive future growth.”
