Microsoft Q2 FY6/25 Earnings Review

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Bumping Along At Local Lows … For Now

by Alex King, Cestrian Capital Research, Inc

Microsoft earnings were pretty good. A beat, with guidance for revenue to slow just a touch. Remaining performance obligation (RPO), which is the value of the order book, grew 34% vs prior year - that’s the fastest rate of growth since June 2022. Where RPO growth goes, the rate of revenue growth usually follows, not in any kind of certain or linear manner, but usually. If the order book is growing faster than recognized revenue (it is, 34% vs 12% QoQ and vs 15% TTM) and if the order book represents a good chunk of TTM recognized revenue (it does, 114%, the highest on record), then probably the momentum in the order book will drag recognized revenue growth up.

The stock duly dumped, down 6% at the time of writing. I am not sure this will last.

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