US tech giant Microsoft reported Q2 earnings and despite missing on the numbers, the stock has rallied.

Overview

Having just released earnings for the recent quarter ending June 30th, here’s how the American Tech giant, Microsoft (NASDAQ: “MSFT”), performed and what to expect from the stock in the coming months, after showing their slowest revenue growth since 2020.

Financials

Posting $2.23 earnings per share, adjusted, vs. $2.29 per share as expected by many analysts. Combined with also missing expected revenue targets of $52.44bn when in fact they posted $51.87bn. The company’s earnings per share fell short of consensus for the first time since 2016, with net income rising 2% to $16.74 billion. Noting that some of their biggest troubles stemmed from worsening foreign exchange rates, as the dollar fell in value considerably, cash on hand is still relatively strong at $14.22bn up from $12.49bn in March 2022. However, Microsoft’s Intelligent Cloud segment, which includes the Azure public cloud for application hosting, SQL Server, Windows Server and enterprise services generated $20.91 billion in revenue. Looking at the balance sheet, cash on hand was strong at $104.7bn with total assets at $364.8bn. Total liabilities for Q2 2022 came in at $198.3bn, leaving Microsoft net positive $166.5bn. Overall, very strong as you would expect!

Technicals

Microsoft currently sits at $271.69, significantly down from its 52-week high of $349.67, since the start of 2022 shares of Microsoft have fallen 21.8% but that just mirrors the trend for most technology stocks, Microsoft has the potential to move to the upside with shares rising 5% in Tuesday trading despite earnings misses current resistance level sits at $280 with resistance at the $250 level, MSFT has been trading in consolidation around $268 where the possibility of a breakout is relevant. Toward the downside, the stock has formed a double bottom at around $240, so unless this level is broken on a daily timeframe, the possibility of consolidation or upside is likely. Towards the upside, the tough hurdle for Microsoft is the $280 downside resistance. A break towards the upside could allow the tock to push back towards its highs over time, which will drag the general market higher as well!

Summary

Overall, as a company Microsoft is strong, it always has been. But for the future, Microsoft has such strong capital allocation strategy’s that it’s hard to have a negative outlook on the stock. Especially with the possibilities available for their cloud computing services, Azure, which grew 40% this quarter alone. Microsoft’s Productivity and Business Processes segment including Office productivity software, Dynamics and LinkedIn posted $16.60 billion in revenue. That was up nearly 13%.