Microsoft ($MSFT) Weekly Deep Dive: Earnings Beat, But Cloud Concerns Weigh on Stock – What’s Next?

Strong results weren’t enough to keep MSFT afloat—can it recover, or is more downside ahead?

Feb 02, 2025

Alright, let’s talk about Microsoft ($MSFT) this week. The company dropped Q2 earnings last Wednesday, and while the numbers were strong, the stock still fell over 6% after the report. The question now is:

👉 Is this just short-term noise, or is there more downside ahead?

This breakdown will cover what happened with earnings, what the chart is telling us, and where the stock might go next. Let’s get into it.

Earnings Recap: Strong Results, But Investors Focused on Cloud Growth

Microsoft’s Q2 (December quarter) earnings were actually solid across the board:

✅ EPS came in well above expectations.
✅ Revenue jumped 12% YoY to $69.63 billion, beating estimates.
✅ Productivity & Business Processes and More Personal Computing segments outperformed guidance.
❌ Q3 (March) revenue guidance was slightly lighter than expected.
❌ Intelligent Cloud (IC) segment came in just below prior guidance.
❌ Azure growth was at the low end of expectations (+31% CC).

So why did the stock drop so hard despite these strong numbers?

Azure Growth: The Market Wanted More

Azure grew 31% in constant currency (CC), which was right at the low end of its 31-32% guidance.
AI-powered Azure services outperformed expectations, but non-AI services faced challenges due to issues with indirect customers and execution bottlenecks.
Microsoft expects these issues to persist in the second half of the year, though AI demand remains strong.

The company also mentioned that Azure AI will be capacity constrained in Q3, meaning demand is there, but they need time to build more infrastructure to handle it. They expect to fully catch up by the end of FY25 after heavy capital investments.

Other Cloud Concerns Weighed on Sentiment

Foreign exchange (FX) was a bigger headwind than expected.
Non-AI Azure services, on-prem servers, and Enterprise & Partner services came in slightly below expectations.
Quarterly variability in Azure revenue recognition also played a role in the softer numbers.

So in short:

AI is booming, but traditional cloud growth faced some bumps.
Investors were hoping for stronger guidance for Q3.
The stock is reacting more to future growth concerns than past performance.

Now, let’s flip to the technicals and see what the chart is telling us.

Chart Breakdown: Key Levels to Watch

📉 The Big Drop – Where We Stand Now

Looking at the chart, the first thing that stands out is the post-earnings gap down on January 30, 2025, which happened on high volume. That’s a clear sign that big funds dumped shares after the report.

Right now, MSFT is sitting at $415.06, trying to stabilize after that sharp drop. But it’s at a critical level, right in the middle of an important trading range.

🛑 Support – The Floor

$384.12 → This is the key support level to watch. If MSFT drops to this area and holds, it could be a potential bounce zone where buyers step in.

If it breaks below $384, though? Watch out. That could trigger another leg down.

🚀 Resistance – The Ceiling

$440.12 - $456.12 → These are major resistance levels. If MSFT rallies but stalls at $440-$456, it could signal another pullback.

But if MSFT breaks above $440 and holds, that would be a bullish sign that buyers are regaining control.

Momentum & Strength – Who’s in Control?

📊 Relative Strength (RS) – Weak

RS Score: 3/10 → Microsoft is currently underperforming the broader market, meaning buyers haven’t fully stepped in yet.

📉 MACD – No Strong Signal Yet

The MACD is flat, meaning momentum isn’t pushing strongly in either direction. The stock isn’t collapsing, but it’s also not showing a strong reversal yet.

Right now, MSFT is just stabilizing—waiting for its next big move.

Where Are the Trade Setups?

Now, if you’re looking for potential trade setups, here’s what stands out:

💰 Bullish Setup – Looking for a Bounce

If MSFT pulls back to $384 and holds, that could be a solid entry point for a bounce.
If MSFT closes above $440, that would confirm buyers are stepping back in and could signal more upside ahead.

📉 Bearish Setup – Betting on More Downside

If MSFT rallies but gets rejected near $440, that could be a shorting opportunity for another move lower.
If MSFT breaks below $384, expect more downside pressure.

Final Thoughts – What’s Next for MSFT?

Right now, Microsoft is dealing with post-earnings volatility—the numbers were strong, but investors were hoping for better cloud growth and stronger guidance.

The stock hasn’t fully broken down, but it also hasn’t found solid footing yet.

The key price levels to watch in the next few days:
🔹 Holds $384? Possible bounce.
🔹 Breaks above $440? Buyers are back.
🔹 Fails at $440 or drops below $384? More downside ahead.

For now, MSFT is in wait-and-see mode, and the next few trading sessions will be crucial in determining where it heads next.

🔥 What do you think—does MSFT bounce back, or is there more downside ahead? Drop your thoughts below! 🚀📉