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Microsoft stock falls on earnings and revenue miss

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Yahoo Finance tech editor Dan Howley breaks down Microsoft's fourth-quarter earnings results, which were a miss on both the top and bottom line.

Video Transcript

SEANA SMITH: We have Microsoft out with its earnings report. Dan Howley, what do you have?

DAN HOWLEY: That's right, Seana. Microsoft with a miss here on their report. They missed on not just revenue, which came in at $51.9 billion versus estimates of $52.45 billion. But also on earnings per share, that came in at $2.23 versus $2.29 expected. I think the real big miss here, though, and something that people will certainly be talking about is the productivity and business processes. That came in at 14.4 billion versus expectations of 16.7 billion.

And then its all-important intelligent Cloud business, that came in with 20.9 billion in revenue versus 21.1 billion expected. Those are some big numbers from Microsoft. And those are the businesses that really have been propelling the company's share price for the past few years. So to see this miss, obviously, it doesn't bode well for the other competitors in the cloud space. We'll be waiting, obviously, for Amazon later this week. But that is really a disappointing sign from Microsoft.

DAVE BRIGGS: All right, Dan Howley there, tech performer with the surprising news on the miss on both the top and the bottom for Microsoft. Let's get back to our panel, Hank and Hugh. And Hugh, your reaction to the miss from Microsoft, in particular, on the cloud aspect.

- Well, I would defer to Hank on this particular question in the sense that I get the sense he's very much a bottom-up guy. He will know the minutiae of Microsoft earnings better than a Quant macro shop that tends to come from the top-down. I think probably the most interesting part was the last part of your report there because from a pure macro perspective, most of the big tech stocks in the states are in macro regimes. It's not just about bottom-up and company fundamentals. Macro drivers are important as well. Our models have strong explanatory power.

Most are close to macro fair value. Microsoft was pretty much in line with our model. The outlier was Amazon. So the point there about the potential ramifications for other cloud-based businesses like Amazon, if you've got poor company news coming on that basis, and you've got a rich valuation from a macro perspective, that's not a great combination.