EARNINGS REPORTS KEY POINTS:

• Microsoft delivers solid results and beats on EPS and revenue expectations
• Alphabet’s quarterly performance also tops consensus estimates
• S&P 500 futures rise in extended trading, trimming some of their regular-session losses

Most Read: Trading Earnings Season – 3 Steps for Using Earnings Reports

U.S. equity futures rose in extended trading after two of the world’s largest technology companies posted better-than-forecast financial results for the previous quarter, with S&P 500 contracts rebounding and erasing some of their regular-session losses.

Microsoft (MSFT) reported earnings per share of $2.45 on revenue of $52.9 billion for its fiscal third quarter ended March 31, up 10% for the former and 7% for the latter compared to the same period last year. Both metrics topped consensus estimates by a decent margin.

In terms of drivers, the intelligent cloud division was the most important source of business growth, notching a 16% y-o-y gain, slightly below the previous quarter’s 18%. Meanwhile, the personal computing unit continued to perform poorly, declining 9% in the face of weaker demand for PCs and related software.

Elsewhere, Alphabet (GOOG) announced EPS of $1.17 on sales of $69.79 billion for the first three months of 2023, with top- and bottom-lines also surprising to the upside as advertising sales began to stabilize following recent weakness. Google’s parent company also announced a $70 billion share buyback.

Here is how both companies performed relative to Wall Street’s expectations:

MICROSOFT:

• Earnings per share: $2.45 versus $2.24 expected
• Revenue: $52.9 billion versus $51.12 expected

ALPHABET:

• Earnings per share: $1.17 versus $1.08 expected
• Revenue: $69.79 billion versus $68.87 billion expected

Source: DailyFX Earnings Calendar

MARKET REACTION

Alphabet shares (GOOGL) rallied sharply after hours, jumping as much as 4.5%, bolstered by better-than-forecast quarterly numbers. Microsoft’s stock prices also spiked higher, up 4.3% in extended trading in response to the company’s encouraging financial performance during the first three months of the year.

With two of the largest mega-cap firms posting favorable results, investor sentiment could improve in the near term, supporting the tech sector and the broader market. Against this backdrop, the S&P 500 may have fewer obstacles to resuming its rebound in the coming days and weeks.

S&P 500 FUTURES, GOOG AND MSFT 5-MINUTE CHART

Source: TradingView