Microsoft (NASDAQ:MSFT) is set to unveil its earnings report on Wednesday, April 30, 2025. Ahead of this earnings announcement, an analysis of Microsoft’s stock performance following its earnings releases over the past five years reveals a tendency for negative returns. Specifically, MSFT experienced a negative one-day return in 55% of these instances. The median negative return observed was -3.8%, with the largest single-day decline reaching -7.7%. As an aside, also see Can EBAY Stock Rally On Its Upcoming Earnings?
The current consensus estimates suggest earnings per share (EPS) of $3.21 on revenues of $68.43 billion for this quarter. This is in contrast to last year’s earnings of $2.94 per share on sales of $61.86 billion, implying an anticipated slight decline in net profit margins. Growth is expected to primarily arise from Microsoft 365 products and the Intelligent Cloud segment, with the company’s Azure cloud services remaining a pivotal element in Microsoft’s long-term growth strategy.
For event-driven traders, recognizing these historical trends could provide a potential advantage. There are two main strategies: firstly, assessing the historical probability of various post-earnings reactions to strategically position before the earnings release. Secondly, investigating the relationship between immediate and medium-term returns following the earnings announcement to guide trading choices after the release.
From a fundamental viewpoint, Microsoft currently has a market capitalization of $2.9 trillion. Over the trailing twelve months, the company reported $262 billion in revenue, resulting in significant operating profits of $118 billion and a net income of $93 billion. Ultimately, the stock’s response to the upcoming earnings will largely depend on how the actual outcomes align with these consensus estimates and overall market expectations.
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MSFT Stock Historical Odds Of Positive Post-Earnings Return
Here are some notes on one-day (1D) post-earnings returns:
- There are 20 earnings data points documented over the past five years, with 9 positive and 11 negative one-day (1D) returns noted. In summary, positive 1D returns occurred approximately 45% of the time.
- However, this figure drops to 36% if we analyze data for the last 3 years instead of 5.
- Median of the 9 positive returns = 3.1%, and median of the 11 negative returns = -3.8%
Additional information for the observed 5-Day (5D) and 21-Day (21D) returns post earnings is compiled along with the statistics in the table below.
MSFT Stock Correlation Between 1D, 5D, and 21D Historical Returns
A generally less risky strategy (though not beneficial if the correlation is low) is to comprehend the correlation between short-term and medium-term returns post earnings, identify a pair that has the strongest correlation, and execute the corresponding trade. For instance, if 1D and 5D exhibit the highest correlation, a trader may choose to position themselves “long” for the subsequent 5 days if the 1D post-earnings return is positive. Below is some correlation data based on the 5-year and 3-year (more recent) history. Note that the correlation 1D_5D pertains to the correlation between 1D post-earnings returns and the following 5D returns.
Is There Any Correlation With Peer Earnings?
Occasionally, the performance of peers can impact the post-earnings stock reaction. In fact, the pricing may start before the earnings are reported. Below is some historical data regarding the past post-earnings performance of Microsoft stock compared to the stock performance of peers that reported earnings shortly before Microsoft. For an equitable comparison, peer stock returns also denote post-earnings one-day (1D) returns.
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