Microsoft has been on its highest valuation lately with increased sales and business growth through its Cloud-based services and products. Recently on Tuesday, the Windows maker noticed a slight dip in shares despite meeting quarterly sales expectations and beating profit margins and estimations set by market analysts. The reason for this slight dip in the graph is reportedly higher expectations and high hopes after a year-long rally. The company executives may have given a “too good to be true” forecast to its investors which the company could not achieve in this quarter.
In this era of computing technology, Cloud-based services and overall Cloud computing shows a lot of potential. Investors are relying on Microsoft’s cloud computing products and services to invest in the market and enjoy the long-term profits offered by this booming market. The technology company is grabbing maximum market share in Cloud-based technology and working to expand its cloud business services with LinkedIn Social Network, Teams collaboration services, Washington Company and the Redmond. As mentioned in a report by Reuters, these companies have become of the most valuable companies in the world with worth close to USD 2 trillion with over 50% stock hike over the past year because of the COVID-19 pandemic.
Nicholas Hyett, an equity analyst at Hargreaves Lansdown says that what happened with Microsoft is the risk of trading at a high valuation, one tiny disappointment and the market that has driven you profitable will suddenly be unforgiving.
Anyhow, COVID-19 has somewhat acted as a catalyst in the adoption of cloud-based technology throughout the world. Evidently, there has been a 50% revenue growth in this recent quarter for Microsoft’s Azure cloud service. People have been buying out Microsoft products during the pandemic to save themselves from the lockdown boredom and adjust to the work from home culture. The company’s business has really gone up with Microsoft selling more and more laptops, desktops, video game consoles etc.
Speaking about the company’s third-quarter sales that ended on March 31, according to multiple reports, the net income jumped 44% than last year to USD 15.5 billion. According to the data shared by Refinitiv, the revenue earnings of the company accounted for USD 41.7 billion and Earnings per Share income was USD 1.95 apiece. According to a report shared by Reuters, the estimated values as per analysts for this quarter were UD 41.03 billion revenue income and USD 1.78 earnings per share.
These values evidently show that Microsoft has been in profit this year but despite that, the shares fell about 2.5% that resulted in some serious losses. The reason for this dip was that company executives promised a significantly better third-quarter result that the company could actually achieve. So, this dip in shares is a result of higher expectations despite trading on massive valuations and gaining overall profits.
Nicholas Hyett was right when he said “Disappoint a little and the market will be unforgiving”.