Why Microsoft Stock Is Up By 4% Today

Microsoft Stock Rallies After Strong Quarterly Report

Shares of Microsoft gained strong upside momentum after the company released its quarterly report.

The company reported revenue of $51.7 billion and earnings of $2.48 per share, beating analyst estimates on both earnings and revenue.

Microsoft noted that Azure and other cloud services revenue grew by 46%, suggesting that demand for this important segment remained strong. In the next quarter, the company expects to report revenue of $48.5 billion – $49.3 billion.

The market is happy with the company’s performance and the guidance in the cloud segment, which is expected to be a significant driver of Microsoft’s earnings growth.

The company’s stock has been under pressure together with other tech stocks on valuation concerns, and the earnings report provided the company with an opportunity to strengthen the bull case for the stock.

What’s Next For Microsoft Stock?

Microsoft stock is currently down by roughly 15% from the highs that were reached back in November 2021. Analysts expect that Microsoft will report earnings of $9.22 per share in the current year and $10.55 per share in the next year, so the stock is trading at 28 forward P/E. This is not very cheap, but it’s a normal price tag for the robust growth of one of the world’s leading tech companies.

The near-term direction of Microsoft stock will depend on the market’s sentiment towards leading tech stocks. The appetite for risk will soon be tested by the Fed, which will release its Interest Rate Decision and commentary today. In case the Fed is not too hawkish, leading tech stocks may get additional support.

From a big picture point of view, Microsoft’s fundamental story remains solid, and the only question is whether the market will be ready to pay something like 30 forward P/E for the company’s growth. Most likely, the answer is yes, assuming that Fed does not say anything too disappointing.

For a look at all of today’s economic events, check out our economic calendar.