Microsoft endures volatile run

25 Aug 2022 05:11 PM

In early June, Microsoft cut its fourth quarter guidance because of unfavourable moves in the currency markets. The new guidance was for revenue to be between $51.94 billion and $52.74 billion, while the previous forecast was $52.4-$53.2 billion. Although, Microsoft’s share price came under a little pressure in the wake of the update, the stock fell to a one-year low the following week. In late July, Microsoft announced its fourth-quarter figures, and even though the top and bottom-line numbers missed forecasts, traders still reacted positively to the update.

Revenue for the final three months of the financial year increased by 12% to $51.87 billion, marginally undershooting the $52.44 billion that equity analysts were expecting. That rise of 12% was the slowest growth rate in two years. EPS was $2.23, missing the $2.29 forecast – it was the first time that EPS undershot estimates since 2016. Looking to the first quarter, the middle-of-the range guidance was $49.75 billion, and that would equate to growth of 10%, but analysts had pencilled in $51.49 billion, so it was yet another disappointment in that regard.

The Intelligent Cloud division includes various services such as Window server, Azure cloud, and SQL server. The operation registered a 20% jump in revenue to $20.91 billion. Revenue from cloud services grew by 40%, but that was a fall from the 46% rise posted in the third quarter. Other divisions of the business saw less impressive growth figures. The Productivity and Business Process unit saw revenue rise by almost 13% to $16.60 billion. There was a 2% increase in revenue at the More Personal Computing segment, which includes the Windows operating system as well as the Xbox video-game console. The group incurred an expense of $126 million from its decision to stop doing business in Russia, following the invasion of Ukraine.

Microsoft’s share price enjoyed a very bullish run in 2019, and that continued into early 2020, where it traded above $190.00, printing a new record high in early February. Amid the selling frenzy that was triggered by Covid-19, the stock dropped below $133.00 – falling to a five-month low. The relatively small drop was a sign of its resilience. It proceeded to go on a huge rally which saw it trade north of $365.00 in November 2021 – a new record high – but since then it has been broadly trending lower. While the stock holds below the $285.00 region, the near-term bearish trend could continue. Further losses from here, could see it target the $270.00 area. If the share price rallies above the $285.00 zone, it might pave the way for $300.00 to be targeted.

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