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Summary
- Microsoft’s stock rose 4% after surpassing earnings expectations in 1Q FY2024, driven by strong growth in cloud revenue, particularly Azure.
- The company achieved significant double-digit revenue and earnings growth and its highest-ever non-GAAP operating margin.
- Microsoft’s AI initiatives, including the M365 Copilot, provide a strong catalyst for future growth, even though the company’s outlook for FY2024 remains conservative.
- I’m bullish on the stock as the current 34x P/E GAAP TTM can be supported by the recent AI developments in my view.
What Happened
Microsoft’s (NASDAQ:MSFT) stock popped 4% in aftermarket, driven by 1Q FY2024 earnings that surpassed expectations. Despite the seemingly modest 4% rally, I want to point out that reactions to companies exceeding estimates have generally been muted in this earnings season. This can be attributed to high earnings estimates and valuations against the backdrop of elevated long-end interest rates over the past months. According to a Bloomberg article, the median level of outperformance of beats in the current earnings season lagged behind the benchmark index by 0.6%.
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