Microsoft Corporation (NASDAQ: MSFT) set the stage for a thrilling earnings season among the tech giants in the US. Microsoft’s latest earnings report was nothing short of extraordinary, revealing a masterful display of its artificial intelligence capabilities. With a remarkable 13% surge in revenue, catapulting it to a staggering $56.5 billion, Microsoft confidently surpassed the consensus forecast of $54.55 billion, sending its shares up close to 4% pre-market,
What truly caught the attention of investors was the astounding 27% expansion in earnings per share (EPS), reaching an impressive $2.99, smashing the predicted $2.65 forecast. The secret behind Microsoft’s unrivalled success? Its unwavering commitment to innovation, most notably through its strategic investment in OpenAI. This investment has propelled Microsoft to the forefront of the AI revolution, seamlessly integrating this cutting-edge technology across its entire suite of offerings, from Bing to Microsoft365 and even its renowned coding platform, GitHub.
Promising to pursue an aggressive spending path in AI to meet the surging demand has borne fruit, as evidenced by the jaw-dropping $11.2 billion in capital expenditure reported in the latest earnings report, a significant increase from the previous quarter’s $10.7 billion and a staggering 70% growth from the previous year. This substantial investment paid off handsomely, leading to a remarkable 24% boost in the cloud computing business, amassing $31.8 billion. Meanwhile, the intelligent cloud segment saw an impressive 19% uptick, soaring to $24.3 billion, driven primarily by the remarkable 29% expansion in Azure and other cloud services.
Microsoft’s Azure segment managed to thrive, with AI representing 3% of Azure’s growth in the September quarter, thanks to the robust demand stemming from AI. This surge beautifully offset the 22% dip in device revenue, as hardware sales faced their own set of challenges. In a strategic move that further solidified Microsoft’s position as a tech titan, the completion of the $75 billion deal to acquire Activision Blizzard this month promises to introduce an exciting dynamic. With this acquisition, Microsoft’s gaming business now stands to contribute around 10% of its overall revenue. These numbers paint a clear picture of Microsoft’s unassailable dominance in the industry, showcasing its resilience in maintaining its status as a pioneer through relentless technological innovation and shrewd investment in the opportunities that emerge within the ever-evolving tech landscape.
Technical
On the 1D chart, a descending triangle has emerged, with the after-market share price movement potentially resulting in a sustainable breakout from the dynamic resistance. At $342.65, a supply zone could present a challenge in the opening hours of the US session, as a correction remains possible.
The 50-SMA (blue line) has crossed the 25-SMA (green line) to the upside, confirming the presence of sellers in the medium term. If the price moves to close the gap on Wednesday, a retest at $330.53 is possible. At this level, the price could either continue its upward momentum or return within the descending triangle formation, where lower support is established at $310.72.
However, should the price clear the supply zone at $342.65 in the opening hours of the US session, continued upside is likely toward $351.53. Higher resistance is present at $361.98, where the previous uptrend failed to sustain. If it clears this level, the price could look to converge with the $380.93 resistance in the longer term.
Summary
After Microsoft’s stellar earnings report confirmed its leading status in the AI race, its share price has reacted accordingly, with a 4% after-market move. If this uptick sustains, the share price could reach resistance at $361.98 and $380.93 as we near the end of the month.
Sources: Koyfin, Tradingview, Microsoft Corporation
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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