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What’s happening: Shares of Microsoft Corporation fell in after-hours trading on Tuesday following the company’s release of its fourth-quarter results.
What happened: The tech giant reported stronger-than-expected earnings for its fiscal fourth quarter, after the closing bell on Tuesday.
Weaker growth in Microsoft’s flagship cloud segment and a surge in spending exerted pressure on the stock.
How were the results: The Redmond, Washington-based company reported low double-digit growth in sales for the three months ending in June.
Why it matters: Big tech firms have been making huge investments in datacentres to benefit from the AI boom. Alphabet also issued a warning recently about elevated capital spending on datacentres for the remainder of the year.
Microsoft’s capital spending increased 77.6% year-over-year to $19 billion for the fourth quarter, higher than $14 billion in the prior quarter.
Intelligent Cloud segment revenues climbed 19% year-over-year to $28.5 billion, missing market estimates of $28.68 billion, with Azure and other cloud services revenue surging 29%, also falling short of market expectations of 30% growth.
Revenues from the Productivity and Business Processes segment gained 11% year-over-year to $20.3 billion, while revenue generated by Office Commercial products and cloud services rose 12% year-over-year.
The company’s Microsoft 365 Consumer subscribers rose to 82.5 million, while LinkedIn revenues grew 10% in the fourth quarter.
How shares responded: Microsoft’s shares declined 2.8% to close at $411.25 on Tuesday, following the release of quarterly results. The stock has lost around 7% over the past month.
What to watch: Investors will continue monitoring the rising AI trend, which is expected to provide a boost to the company’s results ahead. Overall spending on datacentres will also remain in focus.
Context: The CAD/USD forex pair edged higher on Tuesday amid weakness in the US dollar.
Details: The Bank of Canada had last week cut its key policy rate by 25 basis points (bps) for the second straight month. Prior to this, policymakers had held the benchmark interest rate at a two-decade high of 5% for almost a year to combat soaring inflation.
The central bank lowered its 2024 growth outlook to 1.2%, from the 1.5% projection given in April.
Some weakness in the US dollar lent support to the CAD/USD forex pair on Tuesday. The US dollar index, which measures the greenback’s performance versus a basket of major peers, slipped to 104.55.
Weakness in the price of crude oil, one of Canada’s major exports, limited the gains for the loonie. WTI crude oil for September delivery declined $1.08 to settle at $74.73 per barrel on Tuesday.
The CAD/USD forex pair gained slightly to 1.3851 on Tuesday. The S&P/TSX Composite Index added 0.20% to close at 22,824.67, backed by gains in financial and energy stocks.
What to watch: Investors await the release of GDP data from Canada today. Canada’s economy is projected to expand by 0.1% in May, following the previous month’s 0.3% growth.
The Federal Reserve’s interest rate decision will also remain in focus. The US central bank is widely expected to keep the federal funds rate at a 23-year high of 5.25%-5.50% for the 8th straight meeting.
Other Markets: European indices closed mostly higher on Tuesday, with the DAX 40, CAC 40 and STOXX Europe 600 Index up by 0.49%, 0.42% and 0.45%, respectively, and the FTSE 100 down by 0.22%.
Russia’s defence ministry said the country had taken control of the settlement of Pivdenne in the Donetsk region of eastern Ukraine. The news sent the RUB/USD pair slightly lower in forex trading this morning.
Australia’s inflation rate accelerated to 3.8% year-over-year in the second quarter, from 3.6% in the prior quarter, exerting pressure on the AUD/USD forex pair.
Japan’s retail sales grew by 3.7% year-over-year in June, topping market expectations of 3.3% growth, which sent the JPY/USD pair higher in forex trading this morning.
China’s NBS Composite PMI Output Index declined to 50.2 in July, from 50.5 in the prior month. The index remaining in the expansion zone lent support to the CNY/USD forex pair.
New Zealand’s ANZ Business Outlook Index rose sharply to 27.1 in July, versus 6.1 in the prior month. The region’s business sentiment rising for the first time in six months sent the NZD/USD pair higher in forex trading this morning.
Germany’s import prices, Saudi Arabia’s GDP growth rate, France’s Inflation rate and producer prices, Turkey’s balance of trade, tourism revenues and tourist arrivals, Germany’s unemployed persons, unemployment change and jobless rate, Italy’s industry sales, inflation rate and producer price inflation, Spain’s current account, Eurozone’s inflation rate, US MBA mortgage applications, ADP employment change, employment cost index, Chicago PMI, pending home sales, crude oil inventories, gasoline stocks change and distillate stocks, India’s infrastructure output, money supply M3 and central government budget value, Brazil’s unemployment rate, South Africa’s balance of trade, as well as Russia’s unemployment rate, business confidence, real wages, retail sales, money supply M2 and GDP.
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