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Microsoft (MSFT) shares dropped by 2.6% in after-hours trading, even though the company reported earnings that surpassed expectations.
The company reported earnings of $1.95 per share, beating the expected $1.78, and revenue of $41.71 billion, higher than the anticipated $41.03 billion.
The standout performer was Microsoft’s Azure cloud computing platform, which saw a 50% revenue increase for the quarter. This continues the strong growth trend from the third and fourth quarters of 2020.
Microsoft’s CEO, Satya Nadella, remains optimistic about the company’s future, noting that digital adoption is accelerating, and Microsoft is building a cloud platform designed for the next decade to help customers adapt and transform.
Despite these positive numbers, there doesn’t seem to be an obvious reason for the stock’s decline. It’s possible that the market was expecting even stronger results than those delivered.
In the days leading up to this report, Microsoft’s stock had risen in four out of the last five sessions, hitting four new all-time highs. This recent success might have led to overly optimistic short-term expectations from investors.
Microsoft’s stock remains in a strong upward trend, and any pullback could present a buying opportunity for investors. The company’s growth rates suggest continued success, particularly in the cloud computing sector, which is expected to be a major revenue driver.
Support levels are seen at the February highs of $246 per share and again at the lower end of the ascending channel at $236. Buying during any temporary weakness could be a good strategy, as the stock is likely to continue reaching new highs.
Alternatively, if the stock closes above the top line of the ascending channel, it could signal a good entry point for a long position, with the intention of selling if the price falls back within the channel.
However, a close below the 50-day moving average at $218 would challenge the long-term bullish outlook.