Microsoft Corporation (NASDAQ: MSFT) reported second-quarter earnings with revenue totalling $62.02 billion, marking a 17.6% YoY increase, and earnings per share (EPS) at $2.93, a 26.82% YoY surge, after the bell on Tuesday. While delivering a top and bottom line beat, the figures reflect a +1.62% revenue surprise and a +6.16% EPS surprise. Key segments performed strongly, with Intelligent Cloud showing a 20% YoY revenue increase, Productivity and Business Processes up 13%, and More Personal Computing rising by 19%. The company’s Azure cloud services outperformed, registering a 28% growth, with artificial intelligence (AI) contributing significantly to Azure’s growth.
Despite the positive results and AI momentum, Microsoft’s stock experienced a marginal dip in after-hours trading, potentially reflecting a “sell-the-news” scenario after a 70% rally over the past year. Analyst commentary suggests that the AI narrative, while impactful, may have already been priced into the stock. AI services contributed six percentage points to Azure’s growth in the quarter, doubling from the previous quarter, demonstrating Microsoft’s success in integrating AI across its tech stack. While Microsoft’s share price has rallied over the past year, traders may opt for profit-taking and rotations into cyclical sectors.
The weekly-hour chart shows that Microsoft’s share is looking to open lower following a decline of over 0.75% post-market following the company’s second-quarter earnings after the bell on Tuesday. The price action currently trades above its upward-sloping 50-SMA (blue line), 100-SMA (orange line), and 200-SMA (red line), indicating long-term bullishness. However, the recent cross of the 50-SMA above the 100-SMA suggests a potential shift in short-term momentum.
At 76.61, the RSI is deep into overbought territory, suggesting a potential pullback could exist, which could offer short-term trading opportunities lower, with the 23.60% Fibonacci retracement level ($367.34) likely to provide significant support. The all-time high of $413.05 would remain firmly in play should the 23.60% Fibonacci retracement level hold. A break above the all-time high on significant volume could confirm the bullish momentum, leaving the $435.00 price level as the next likely level of significance in the short term.
However, a break below the 23.60% Fibonacci retracement level could trigger a selloff, with the 38.20% Fibonacci retracement level ($339.06) and 50.00% Fibonacci retracement level ($316.20) acting as the next significant levels lower.
Microsoft’s strong Q2 and AI progress faced a lukewarm market response. The technically overbought stock could pull back, finding support at the 23.60% Fibonacci level ($367.34). A hold above this level reinforces the bullish trend, with the all-time high as a potential near-term target. However, a breakdown below initial support could trigger a deeper selloff, likely warranting a cautious approach in the coming sessions.
Sources: TradingView, Trading Economics, Microsoft Corporation, Dow Jones Newswire, Seeking Alpha, Zack’s.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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