Microsoft Tumbles Despite Beating Across The Board

Looking at Microsoft’s earnings reported moments after the close, which beat from the top to the bottom line, and one would think that the stock is soaring after hours. But instead what one would find is an inexplicable plunge of 6% which can only be attributed to someone bearishly positioned and slamming the stock after hours in hopes of setting a narrative that MSFT’s beat wasn’t strong enough.

Here is what the company reported for Q4:

• Revenue $51.73 billion, +20% y/y, beating estimates of $50.87 billion
• EPS $2.48 vs. $2.03 y/y, beating estimates of $2.31
• Operating income $22.25 billion, +9.9% q/q, beating the estimate $21.06 billion
• Capital expenditure $5.87 billion, +41% y/y, beating estimates $5.83 billion

Drilling into the revenue numbers shows even more beats:

• Productivity and Business Processes revenue $15.94 billion, +19% y/y, beating the estimate $15.91 billion
• Intelligent Cloud revenue $18.33 billion, +26% y/y, beating the estimate $18.32 billion
• More Personal Computing revenue $17.47 billion, +15% y/y, beating the estimate $16.67 billion

“Solid commercial execution, represented by strong bookings growth driven by long-term Azure commitments, increased Microsoft Cloud revenue to $22.1 billion, up 32% year over year” said Amy Hood, executive vice president and chief financial officer of Microsoft.

If that wasn’t enough, Microsoft was also quite generous and returned $10.9 billion to shareholders in the form of share repurchases and dividends in the second quarter of fiscal year 2022, an increase of 9% compared to the second quarter of fiscal year 2021.

And yet, despite what any other day would have sent the shares soaring 5% to 10% higher, has instead led to a tumble as the merciless market seems ready to punish anything tech related, even if for all the wrong reasons.

That said, don’t be surprise if like with IBM yesterday, the reaction reverses, because while IBM remains a melting ice cube, Microsoft – for better or worse – is one of the best companies in the world. And with the company not guiding in its press release but saying it will provide guidance on the call:

Microsoft will provide forward-looking guidance in connection with this quarterly earnings announcement on its earnings conference call and webcast

we expect that the selloff will reverse as there is little reason for MSFT to spook markets with how it sees the future.