Microsoft Q2 earnings: Can MSFT meet the market’s sky-high expectations?

As always with Microsoft, the fast-growing cloud computing platform, Azure, will be a major focus for traders...

Microsoft

As one of only two companies with a $2 trillion dollar market capitalization, Microsoft (MSFT) is one of the most closely-watched and traded stocks on the planet. See what to expect from the company’s key Q2 earnings report below:

When are MSFT earnings?

Tuesday, July 27th after the closing bell.

What are MSFT’s earnings expectations?

Traders and economists are expecting Microsoft’s adjusted Q2 EPS to come in at $1.90. Revenue is expected to come in at $44.1B.

Key themes to watch from MSFT earnings

Microsoft splits its business into three similarly-sized segments: “Productivity and Business Processes” (including the Microsoft Office suite), “Intelligent Cloud” (including Azure) and “More Personal Computing” (highlighted by Windows and Xbox). With company IT budgets recovering and continued strength in personal computer sales, analysts are calling for strong growth across all three segments so the “whisper” expectations may be even higher than outlined above.

As always with Microsoft, the fast-growing cloud computing platform, Azure, will be a major focus for traders. The company has recently expanded its cloud availability to many new regions outside the United States, including China, Indonesia, and Malaysia. Meanwhile, after a rocky rollout, Microsoft’s workspace communication tool Teams has hit its stride amidst the broader pandemic-driven shift to remote work and online working. With tight integrations with other widely-used productivity tools like Powerpoint and SharePoint, traders are anticipated ongoing strong adoption of Teams this quarter.

MSFT stock technical analysis

Looking at the chart, MSFT shares have kicked into overdrive over the last two months, adding nearly $400B to its market capitalization; for reference, that’s roughly the entire market capitalization of industry leaders like Walmart (WMT) or Mastercard (MA). That said, the stock is showing a bearish divergence with its 14-day RSI near the highs, suggesting that the buying pressure may be waning and the stock could be vulnerable to a pullback if earnings don’t beat the market’s expectations handily.

Source: StoneX, TradingView

In the way of price targets, a strong earnings report could clear the way for a run up to the psychologically-significant $300 level whereas a disappointing release could prompt a pullback toward the 21-day EMA near $275.

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