• Microsoft tops top and bottom-line expectations.

• The company reports strong revenue growth across all segments.

• Tech giant places a heavy emphasis on AI.

• Technicals indicate buy, but fundamentals point to sell.

In Q3, Microsoft exceeded expectations, with revenue reaching $52.86B, a 7% YoY increase from the estimated $51.02B. The company is performed exceptionally well in all its segments:

– Productivity and Business Processes revenue: $17.52 billion beat (estimated $17.1 billion).

– Intelligent Cloud revenue: $22.08 billion beat (estimated $21.89 billion).

– More Personal Computing revenue: $13.26 billion beat (estimated $12.15 billion).

Microsoft Corporation reported better-than-expected quarterly profit and sales, driven by corporate cloud-computing demand and a strong outlook for AI services.

Notably, Search advertising revenue jumped 13% as Bing and other Microsoft products continue to integrate “ChatGPT”.

The company has made massive investments in artificial intelligence, including a reported $10 billion investment into OpenAI and a new Bing internet search chatbot, to ramp up future sales of Azure, search ads, and office-productivity programs.

Microsoft’s AI products for Bing and Office were recently introduced and are not yet significantly contributing to sales, but the company is experiencing promising initial signs in terms of usage and customer demand. The company is betting heavily on Artificial intelligence (AI) as it mentioned the acronym over 60 times in its latest quarterly call.

“We look forward to continuing this journey in what is a generational shift in the largest software category — search,” Nadella said on the call.

The company has gathered some wild momentum this year, up over 25% year-to-date, as it continues to trade in an upward trend (blue lines channel).

However, the momentum might be over soon, as fundamentally Microsoft might be facing some serious headwinds. The company looks pricey on a relative valuation. The tech giant is priced around 28x forward twelve months’ earnings. That’s near the company’s highest price-to-earnings ratio in eight months and 1 standard deviation above the stocks’ averages over the past decade.