Microsoft Q2 earnings preview: what to expect?

Microsoft Corporation (NASDAQ: MSFT) will report strong results for its fiscal second quarter, says Plexo Capital’s Lo Toney. The tech giant is scheduled to reveal its Q2 earnings today, after the bell.

Toney’s comments on CNBC’s “TechCheck”

MSFT has tanked a little under 15% in January as investors are rotating out of high-flying tech names ahead of the upcoming rate hikes. Strong earnings, therefore, could mean much-needed support for the stock. On CNBC’s “TechCheck”, Toney said:

Microsoft is an amazing story. It’s one of the unbelievable companies that has been able to maintain an impressive growth rate, a lot of which has come through the cloud. We’re expecting that we’ll continue to see double-digit growth mainly driven by their cloud business.

Also on Tuesday, Wedbush Securities said “underlying growth drivers” for the tech space are more promising now than they’ve been in more than 25 years. The Washington-based company recently announced a new cross-platform logistics solution for eCommerce in collaboration with FedEx.

Here’s what investors will focus on tonight

Last week, Microsoft said it will buy Activision Blizzard for $68.70 billion in cash. The American multinational benefitted greatly from the pandemic that had businesses switch to “work-from-home”, and Toney said its outlook on the post-pandemic demand will remain in focus tonight.

One of the questions we have for Microsoft is how much of the demand was actually pulled forward from 2022 and 2023 into 2021. Another question would be; with this acquisition of Activision Blizzard, what is their strategy moving forward around consumer.

The founding managing partner of Plexo Capital has confidence in Microsoft’s ability to better withstand inflationary pressures, thanks to its strong profitability and free cash flow. The stock closed 2021 with a 50% gain.