Microsoft Earnings Preview: Will Q3 Results Boost the Stock?

Microsoft (NASDAQ:MSFT) is scheduled to release its earnings report on Wednesday, April 30, 2025. Ahead of this announcement, a review of the company’s historical post-earnings stock performance over the past five years reveals that MSFT experienced a negative one-day return in 55% of these instances. The median negative return was -3.8%, with the largest single-day drop being -7.7%.

Current consensus estimates anticipate earnings per share (EPS) of $3.21 on revenues of $68.43 billion for this quarter. This compares to the previous year’s earnings of $2.94 per share on sales of $61.86 billion, suggesting an expected slight decrease in net profit margins. Growth is projected to be primarily driven by Microsoft 365 products and the Intelligent Cloud segment, with the company’s Azure cloud offerings remaining a critical factor in Microsoft’s long-term growth strategy.

For event-driven traders, understanding these historical patterns could offer a potential edge. There are two primary approaches: first, analyzing the historical probability of different post-earnings reactions to strategically position before the earnings release. Second, examining the correlation between immediate and medium-term returns following the earnings announcement to inform trading decisions after the release.

From a fundamental perspective, Microsoft currently holds a market capitalization of $2.9 trillion. Over the trailing twelve months, the company generated $262 billion in revenue, achieving a substantial $118 billion in operating profits and a net income of $93 billion. Ultimately, the stock’s reaction to the upcoming earnings will heavily depend on how the actual results compare to these consensus estimates and overall market expectations.

That said, if you seek upside with lower volatility than individual stocks, the Trefis High Quality portfolio presents an alternative – having outperformed the S&P 500 and generated returns exceeding 91% since its inception.

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Microsoft’s Historical Odds Of Positive Post-Earnings Return

Some observations on one-day (1D) post-earnings returns:

• There are 20 earnings data points recorded over the last five years, with 9 positive and 11 negative one-day (1D) returns observed. In summary, positive 1D returns were seen about 45% of the time.
• However, this percentage decreases to 36% if we consider 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 data for observed 5-Day (5D), and 21-Day (21D) returns post earnings are summarized along with the statistics in the table below.

MSFT 1D, 5D, & 21D Post Earnings Return

Correlation Between 1D, 5D, and 21D Historical Returns

A relatively less risky strategy (though not useful if the correlation is low) is to understand the correlation between short-term and medium-term returns post earnings, find a pair that has the highest correlation, and execute the appropriate trade. For example, if 1D and 5D show the highest correlation, a trader can position themselves “long” for the next 5 days if 1D post-earnings return is positive. Here is some correlation data based on 5-year and 3-year (more recent) history. Note that the correlation 1D_5D refers to the correlation between 1D post-earnings returns and subsequent 5D returns.

MSFT Correlation Between 1D, 5D, & 21D Historical Returns

Is There Any Correlation With Peer Earnings?

Sometimes, peer performance can have influence on post-earnings stock reaction. In fact, the pricing-in might begin before the earnings are announced. Here is some historical data on the past post-earnings performance of Microsoft stock compared with the stock performance of peers that reported earnings just before Microsoft. For fair comparison, peer stock returns also represent post-earnings one-day (1D) returns.

MSFT Correlation With Peer Earnings

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