Microsoft Rises into Q4 Earnings Report After CrowdStrike Outage

Microsoft stock is up over 3% since Friday, while CrowdStrike trades 10% lower

• Microsoft is scheduled to report fourth-quarter fiscal earnings on Tuesday, July 30.
• The company’s stock price is trading just below its recent all-time high, as volatility rises.
• Options show an expected move of +/- 21 for Aug. 2 expiration.

Microsoft trades higher into earnings after global IT outage

Microsoft (MSFT) will report its fourth-quarter fiscal results on Tuesday, July 30, after market close.

It’s been a tumultuous week for Microsoft leading up to the earnings report, as the global IT outage caused by a software update from CrowdStrike (CRWD) brought down computers running Microsoft’s Windows operating system, affecting everything from airlines to retail payment terminals.

Most companies have remediated the outage, but airline operator Delta (DAL) continues to cancel hundreds of flights as of July 23. Microsoft has put blame on the European Union and its rules that prevent it from walling off kernel access to third-party security app developers.

Microsoft and CrowdStrike are separately owned, but their software is closely integrated. Microsoft stock is up over 3% since Friday, while CrowdStrike trades nearly 10% lower over the same time. Meanwhile, market volatility remains elevated as traders grapple with a quickly evolving political landscape in the United States.

What do investors expect from Microsoft?

The report will mark the third earnings for this season from the Magnificent Seven—a group of stocks that make up about half of the Nasdaq’s weighting—following reports from Tesla (TSLA) and Alphabet (GOOG), which report earnings today. Meta Platforms (META), Apple (AAPL) and Amazon (AMZN) will report in the two days following Microsoft.

According to Yahoo Finance, investors expect MSFT to report earnings per share (EPS) of $2.93 for the quarter ending in June. Revenue is expected to come in at $64.4 billion. That would be up from $2.69 per share on $56.2 billion revenue from a year ago. Last quarter, MSFT reported EPS of $2.94 on $61.9 billion in revenue. The average analyst price target is 494.19, which is 10% above today’s stock price.

Microsoft’s Intelligent Cloud segment is in focus after posting year-over-year growth of 21% in the third quarter. Capital expenditures on AI infrastructure should increase as the company expands capacity to meet growing demand, which outpaced capacity over the last quarter.

Last quarter’s guidance called for 10% to 13% growth in personal computing, and a revenue decline to the mid to high single digits for enterprise and partner services. Gaming revenue growth was forecasted in the low to mid-40s, with the Activision acquisition considered. CEO Satya Nadella and Chief Financial Officer Amy Hood will hold a conference call following the results.

Trading Microsoft earnings

Options pricing shows an expected move of +/- 21 points for the Aug. 2 expiration. That represents a 4.7% move based on today’s stock price of 446.60. That isn’t necessarily a large move for earnings.

MSFT’s implied volatility rank (IVR) stood at 63.3, meaning volatility is elevated relative to the past 12 months. An iron condor with the short strikes set at or just beyond the +/- 20 point range would make sense for traders who expect the stock price to stay within the expected move.

Technically, MSFT saw resistance today at its 9-, 12- and 21-day exponential moving averages (EMAs). If prices can clear the EMAs, it would bring the July all-time high into focus.

Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater

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