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Microsoft is set to release its fiscal year 2025 Q1 earnings on Wednesday, October 30, after the closing bell, following last quarter’s dip in artificial intelligence sales. Key areas of focus will be Azure’s performance, especially in AI-driven cloud services, as investors and traders look for signs of growth. Analysts expect year-over-year revenue and earnings increases for the tech giant.
WHAT SHOULD TRADERS BE FOCUSED ON?
As Microsoft’s earnings draw near, traders and investors should focus on key areas to assess the company’s momentum and prospects. Before Microsoft releases its earnings, here is what you should know:
- Cloud Services: Microsoft’s cloud revenue growth remains a key focus, especially regarding new customer acquisitions and service expansions. Azure’s revenue, particularly from AI services, is critical to assess as it reflects Microsoft’s competitive stance in the cloud market. Monitoring these metrics provides insight into Microsoft’s ongoing growth and market position.
- AI Integration and Adoption: Markets will be eyeing adoption rates for AI services such as GitHub Copilot and Microsoft 365’s Copilot, along with updates on new AI features and customer feedback. Additionally, traders should monitor Microsoft’s capital expenditures in AI to gauge its commitment and growth potential in this area.
- Productivity and Business Processes: Microsoft 365’s performance will also be a key talking point, focusing on ARPU growth and changes in new business growth for individual products. For Dynamics 365, markets will also be tracking updates on market share gains and the integration of AI features.
- Guidance and Outlook: For the fiscal year 2025, key areas to watch include revenue and operating income growth projections, with particular focus on updates in capital expenditures for cloud and AI. Additionally, management’s insights on market conditions, competitive landscape, and potential risks like economic downturns and regulatory changes will be critical.
- Share Repurchases and Dividends: Monitor the amount returned to shareholders through share repurchases and dividends. This indicates Microsoft’s commitment to returning value to shareholders.
MARKET EXPECTATIONS
Earnings per Share (EPS): $3.11
Revenue: $64.5 bn
Last quarter, Microsoft reported $36.8 billion in cloud revenue, a 21% year-over-year increase but slightly below analysts’ $37.2 billion forecast. The Intelligent Cloud segment, including Azure, contributed $28.5 billion, with Azure and related services growing by 29%.
Analysts also expect Azure growth in the low-to-mid 30% range for the upcoming quarter and noted that Microsoft must exceed growth expectations with minimal deceleration to meet investor demands.
On the AI front, Microsoft announced plans to boost its investment in AI infrastructure to match rising demand, though these costs have pressured its stock. Recently, the company introduced several new AI initiatives, including updates to its Copilot AI assistant and autonomous AI agents for Copilot, showcasing its continued focus on AI-driven features.
Microsoft has been on a bullish run, showing resilience even as broader markets grapple with bearish pressures.
In reaction to earnings, MSFT stock is prone to significant volatility. Traders and investors should carefully consider Microsoft’s long-term outlook and be prepared for unexpected movements during the earnings announcement.
TECHNICAL ANALYSIS
Microsoft has been trending upwards since its August 5 low, where it formed a strong demand zone and started to form higher highs and higher lows. Price looks to be stabilizing near support at $424.
Positive earnings could be a catalyst for the stock to move higher. Traders will be watching for a potential breach the September 19 high at $440, with the next resistance marked around $447.
On the flip side, weak results could place the stock in bearish territory, where support around $405 could come into effect. After the earnings release, market sentiment can be inferred by watching how the stock responds around these levels.
