News comes fast and furious in turbulent times. Issues like inflation, interest rates, recession are all capturing the headlines today. But there is more to the economy than just the headlines and leaders take the time to read the article rather than react to the headlines.
The level of uncertainty, contradictions and mixed earnings require leaders to understand more than headline. Here is an example.
This week Microsoft announced earnings. Investopedia analyzes the results with the headline “MSFT missed on earnings and revenue”. Based on the headline alone, one would presume that the recession was deepening as a company as well run as Microsoft missed the mark. One could assume that Microsoft’s stock price would fall, and it did, initially. Shares of Microsoft stock fell by about 1.2% in after-market trading hours. But reading the whole article, a broader position emerges:
- Microsoft continues to expect double digit revenue and operating income in both constant currency and U.S. dollars.
- Worsening foreign exchange rates will adversely impact revenue recognition, an impact that does not reflect the underlying strength of the business.
- Microsoft’s cloud revenue from Azure and other cloud services continued to grow by 40% in the quarter, slower than the prior quarter, but close to the estimates of 41%.
- Finally, Microsoft’s CEO pointed out “We are seeing larger and longer-term commitments and a record number of $100 million-plus and $1 billion-plus deals this quarter.”
The point is not specific to Microsoft, but the potential for the title alone to reach the wrong conclusion.
Act based on the whole story
No one can predict the future, but that will not keep people from trying. Microsoft’s share price on date of the announcement closed at $251.90. Two days later it closed at $276.41 a change of almost 10% in two days. Microsoft or any companies future share price is just as unpredictable as the future.
Leaders act based on their understanding of the current situation as well as thoughts on the future. In making those predictions, in contemplating actions, it is necessary to look at as full a picture as possible.
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Expect buyers to ask for more ‘skin’ in the game from providers in the coming recession.
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