When will Microsoft release first quarter results?
Microsoft will release its first-quarter results after markets close on Tuesday, October 25. A conference call will be held at 2:30 p.m. PT.
Consensus on Microsoft’s first-quarter earnings
Wall Street expects Microsoft to post a 9.6% increase in revenue in the first quarter of its new fiscal year to $49.66 billion, down from its forecast range of $49.25 billion to $50.25. billion, and a 1.8% increase in diluted EPS to $2.31.
Overview of Microsoft’s first quarter results
Microsoft is expected to post the strongest earnings growth of any Big Tech this season, though at just 1.8%, that’s not much to cheer about.
Microsoft provides a range of business-critical services and products, such as cloud computing and software, and that should benefit the company this season, as demand here is expected to hold up better than on the consumer side. This is evidenced by the fact that revenue from Microsoft’s more consumer-oriented More Personal Computing arm is expected to decline year over year and be offset by strong growth from its other enterprise-facing units:
(Source: Bloomberg Q1 2023 estimates)
The company, which generates more than half of its sales outside the United States, will feel the impact of the strong dollar as sales are expected to grow by almost 15% at constant exchange rates.
More Personal Computing, which benefits from Xbox game consoles, Surface laptops, its Windows operating system and its search and advertising operations, is expected to see a 1.4% decline in revenue and a 5.7% drop in operating profit to $4.8 billion. We’ve already heard warnings from other tech companies, including semiconductor stocks, that demand for games and consumer electronics has stalled. The boom in business hardware demand at the height of remote working during the pandemic is also unfolding. This not only affects the demand for its hardware, but also impacts the number of people using its Windows system.
Productivity & Business Processes is home to its Office and Dynamic software suite as well as its recruitment-focused social media site LinkedIn. The software, which is mainly offered as lucrative licenses, remains essential for individuals and businesses and demand is expected to hold up better than other forms of software in the future. Forecasts suggest consumer office demand will continue to grow, but will be much slower on the business side. LinkedIn will also contribute to revenue growth as working conditions remain difficult. The global division is expected to post a 7.3% increase in revenue and a 5.2% increase in operating profit to $7.8 billion this quarter.
Intelligent Cloud remains the main contributor to both revenue growth and operating profit. The unit is expected to generate a 20% increase in revenue and a slightly faster 21% increase in operating profit this quarter to $8.7 billion. Azure, which underpins its cloud operations and is often watched closely by the markets, is expected to see an impressive 43% increase in revenue at constant currency and remains the brightest part of the business.
Microsoft said it aimed to deliver double-digit revenue growth and higher operating profit at constant currency this fiscal year when it set targets earlier in 2022, but that could be vulnerable given slower growth and multiple headwinds limiting progress in terms of results. Wall Street currently thinks it can pretty much deliver on its promise, with full-year revenue growth forecast of 10.8% and a 9.9% increase in operating profit.
What’s next for MSFT stocks?
Microsoft shares have rebounded since hitting a 34-month low just over a week ago, although the rally has already shown signs of running out of steam.
Trading volumes have been declining over the past week and the five-day average volume is both 25% below the 10-, 20- and 30-day averages, although we will likely see a spike on the day of the results and following the update as we have seen in the past. We could see the stock back towards the $225 mark, in line with the March 2021 low, if it remains under pressure and the 34-month low of $219 remains in play.
The stock briefly managed to climb back above the $239 resistance-turned-support level we saw in March 2021 before coming back under pressure. This is the first upside target for the stock before $241.50, the June low, comes back into view. From there, he can look at a sharper jump to retake the October high of $250 and then the 50 and 100 day moving averages are back. Notably, the 200-day moving average is currently in line with the June high at $275.
The 52 brokers that cover the stock believe there is even greater upside potential with an average target price of $323, although that price has been reduced by more than $346 in the past three months.
Turning to the weekly chart, we can see that Microsoft shares have been forming a series of lower highs and lower lows since peaking at all-time highs just under a year ago and this upward trend drop is still intact.
Take advantage of extended trading hours
Microsoft will release earnings after U.S. markets close, meaning most have to wait until they reopen the next day before they can trade. But by then, the news had already been digested and the instant stock price reaction occurred after hours trading. To react immediately, traders must take their positions in pre- and post-trade sessions.
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