Microsoft Earnings Preview: AI and Activision's Impact?
Microsoft Earnings Preview: AI and Activision's Impact?
By:Mike Butler
Microsoft has exceeded EPS estimates four quarters in a row. Will it be five?
- Microsoft will report quarterly earnings on October 24 after the stock market closes at 3:05 p.m. Central Time.
- The tech giant is expected to post EPS of $2.65 on $54.54 billion in revenue.
- Microsoft has exceeded EPS estimates four quarters in a row.
- The Activision-Blizzard acquisition has finally closed, securing Microsoft's big gaming and VR investment.
Microsoft (MSFT) stock has had a great 2023 so far, opening the year at $243.08 and sitting well above that mark at a current price of $327.
The stock is already up 35% on the year, and we've yet to approach the holiday season where new bonus money tends to hit the stock market—we'll see if the recent market selloff will scare investors away or entice them to invest in big-name tech stocks like Microsoft.
The stock price has a +-$14.68 expected move through next week based on current implied volatility, which encompasses the upcoming earnings announcement. The stock has a +-$28.04 expected move through the December monthly options cycle, which means this earnings week accounts for about half of the expected movement through nearly the rest of the year.
Bullish on Microsoft Earnings
Microsoft finally closed its $69 billion gaming deal with Activision-Blizzard (ATVI) which is the biggest gaming deal we've seen yet. It also bolstered its artificial intelligence efforts, which sets the company up for a nice positive narrative on this quarterly earnings call.
Microsoft beat earnings-per-share (EPS) estimates four quarters in a row, and revenue estimates 75% of the time during the same period. I don't see much of a negative sentiment with Microsoft earnings this time around with so much positive news, but we'll see what the market says on Tuesday.
Bearish on Microsoft Earnings
Observers have lofty expectations of a strong forecast during Microsoft's earnings call this quarter, and this shouldn't surprise anyone after the massive acquisition of Activision-Blizzard. With grand expectations come an easier path to disappointment though. If future guidance is weak and the tech giant fails to beat EPS and/or revenue expectations—or any other negative surprise becomes known—we could see this popular tech stock fall in value after the earnings announcement in this bleak stock market we've seen recently.
Tune in on Tuesday, Oct. 24 at 11 a.m. Central Time for a full earnings strategy breakdown on Options Trading Concepts Live before the company's announcement.
Mike Butler, tastylive director of market intelligence, has been in the markets and trading for a decade. He appears on Options Trading Concepts Live, airing Monday-Friday. @tradermikeyb
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