Microsoft Crushes Earnings, What’s Next for MSFT Stock?

Written by Chris Markoch

Microsoft Corporation (NASDAQ: MSFT) stock shot up more than 10% in early trading the day after it delivered third quarter 2025 earnings that can rightly be described as a home run. The move in the stock has now erased all of the stock’s losses since February 2025. This is leading to the question of what’s next for MSFT stock.

The company delivered a strong beat on the bottom line, with earnings per share of $3.46, 7% higher than the $3.22 forecast. That number was also 17% higher year-over-year (YoY). On the top line, the results were also strong, with revenue of $70.07 billion coming in at 2.2% higher than forecast and 13% higher YoY.

Investors were paying particular attention to cloud spending. A key reason for the stock’s weakness in the last two months was an unexpected decrease in cloud spending. However, in this report, Microsoft reported a strong 33% increase in cloud spending, with 16% of that increase being attributed to acceleration in artificial intelligence (AI) infrastructure.

Furthermore, while the company reported lower sequential capital spending, it said it expects a sequential rise in capex spending in the fourth quarter, and it maintained its previously issued full-year guidance.

As Microsoft Goes, So Goes the Market

Buy-and-hold investors may believe that too much emphasis is placed on quarterly earnings. That’s because earnings are largely backward-looking. However, after Microsoft reported a drop in cloud revenue in the prior quarter, investors came into this report cautiously optimistic. MSFT stock rose in the five days before earnings.

However, it dropped sharply ahead of the earnings as investors got spooked by the first reading of first-quarter GDP and an indication that inflation is rising. With expectations of a weak jobs report on May 2, the word stagflation is rearing its head.

So while the results by Microsoft weren’t completely unexpected, they were music to shareholders’ ears. The rise in MSFT stock was the primary reason the Dow was positive the day after the report. And there’s reason to believe MSFT stock can go higher, particularly as the company says it is not forecasting any impact from tariffs.

Analysts are Raising Their Price Targets, Putting New Highs in Sight

One confirmation of bullish momentum is that analysts are wasting no time in raising price targets for MSFT stock. As of May 1, approximately a dozen analysts have raised their price targets for Microsoft. Many of those estimates are well above the previous all-time high, with Wedbush posting the highest price target of $515.

Is it Time to Sound the All Clear for Microsoft?

Long-term MSFT stock investors are undoubtedly cheered that Microsoft stock has made up its entire loss since March. The strong post-earnings move has pushed the stock above its 50-day simple moving average (SMA), which is seen as a sign of positive momentum.

It also puts the stock within about 7% of its all-time high in July 2024. Strong reports from other technology stockssuch as Apple Inc. (NASDAQ: AAPL) would help build on that momentum.

What about the stock’s valuation? With the recent surge, Microsoft trades at 34.8x earnings. That makes the stock expensive compared to its historical averages. It could also mean that there will be less sentiment to move the stock higher in the short term. Investors should pay attention to the stock’s volume in the coming days for confirmation of the bullish trend.

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McDonald’s Insiders Sell Shares! Investors Should Do the Opposite

Written by Thomas Hughes

McDonald’s (NYSE: MCD) insiders are selling shares of this in 2025, but investors should do the opposite. The Insider selling is inconsequential despite its broad nature due to the company’s use of share-based compensation and insider selling trends. MCD insiders, including numerous EVPs, presidents, the CMO, the CEO, and directors, have sold shares in small, regularly spaced amounts over the past two to three years as they take money earned off the table.

MarketBeat tracks insider sales in 2025, which amount to about $9.2 million. This is a drop in the bucket compared to the $2.8 billion in share repurchases in 2024 and the outlook for buybacks in 2025.

McDonald’s share buybacks are significant. The company reduced its count by an average of 1.4% in 2024 and is on track to hit the same target in 2025. The Q1 release shows shares are down 1% YOY, with the company’s strongest selling and earnings seasons still ahead. Dividends are also part of the capital return.

McDonald’s dividend is a safe and reliable 2.2%, expected to grow at a mid-single-digit pace for the foreseeable future.

McDonald’s Struggled With Headwinds and Tough Comps in Q1: Capital Return is Safe

McDonald’s Q1 results reflect the impact of headwinds, the tough comparison to last year’s Leap Year, and the company’s resilience in challenging operating conditions. The revenue fell more than expected to $5.96 billion, down 3.0% compared to last year and 270 basis points shy of consensus, but the margin held up despite the deleverage.

The adjusted revenue is less bad, down only 2%, with global comps down 2% and 1% adjusted. The core U.S. market was the weakest, with a 3.6% decline in comparable sales and a 1% decline in international operated markets. The international developing market segment is the standout, growing by 3.5%.

The margin news is good, with consolidated net income down 3%, in line with revenue, producing sufficient cash flow and free cash flow to sustain financial health and capital returns. On the bottom line, EPS was also shy of the reported consensus. Still, it reflects the impact of buybacks, falling by only 2% compared to the slightly larger declines of 3% in revenue and operating income.

The company didn’t give revenue guidance, but investors should expect softness to continue, at least in Q2, but there is a forecast for margin. The company expects the full-year operating margin to be in the mid-to-high 40% range, suggesting flat to improving margins as the year progresses.

Analysts’ Sentiment May Cap Gains for MCD in Q2

Analysts are generally bullish on MCD stock and rate it as a Moderate Buy with bullish bias. However, the trend in Q2 is price target reduction, which is unlikely to end following the Q1 release. At best, the analysts will reaffirm current ratings and targets, which suggest the stock is fairly valued near its all-time weekly closing high of $323.

The risk in Q2 is that the analyst will trim targets or reduce ratings, which could strengthen the market headwind and potentially lead to a correction in this stock. Unlike many S&P 500 and restaurant stocks, McDonald’s did not correct in Q1 and early Q2 and is set up to do so as Q2 draws to a close. The upshot is that a correction in Q2 would set up a buying opportunity for the second half and 2026.

Following the release, MCD’s price action is bearish. Premarket trading shows the stock price down more than 1% and showing resistance at the all-time high. If the market follows through on this signal, MCD shares could decline by 5% to 10% to retest support near $300 and $280.

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Broadcom: Buy, Hold, Sell? AI & Acquistions Paint Strong Picture

Written by Leo Miller

For shareholders in the world’s second-largest semiconductor company, Broadcom (NASDAQ: AVGO), the last several years have borne incredible fruit. Over the past five years, Broadcom stock has provided a total return of approximately 690% as of the Apr. 30 close. The demand for the company’s AI data center infrastructure offerings may be second only to NVIDIA (NASDAQ: NVDA).

Its acquisition of VMware has given it an extremely powerful position in the virtualization market, and Broadcom has made VMware vastly more valuable.

However, the huge run-up in the company’s share price begs the question: Can Broadcom sustain gains long-term? The company is trading for a forward price-to-earnings (P/E) ratio of approximately 28x. This is around 38% higher than the forward P/E of the S&P 500 Index, which sits just above 20x.

This suggests that the market may be overvaluing Broadcom. But is that really the case, and is Broadcom a buy, hold, or sell right now?

This analysis will answer this question by breaking down Broadcom’s two main businesses: semiconductors and software.

Broadcom’s Semiconductor Business: Sustaining Strong Growth Is Far From Out of the Question

Broadcom stock has made most of its hay due to the rabid demand for AI-chips. Sales in this space have been growing at an incredibly fast pace. In 2024, AI-chips and networking solutions grew by 220%. In Q1 2025, the growth rate was 77%. Next quarter, the company sees 44% growth in AI for total AI revenue of $8.5 billion through the first half of 2025.

So, growth rates are coming down, but what is the company forecasting?

The company believes three hyperscalers will generate a serviceable addressable market (SAM) in AI of $60 billion to $90 billion in 2027. However, this is not the revenue the company expects to generate, only the size of the potential opportunity.

Using the current expected sequential growth rate of 7%, Broadcom’s AI-chip business would be worth around $18 billion by the end of 2025. If it grows at a compound annual growth rate of 44% in 2026 and 2027, at the same rate it expects next quarter, the company’s AI revenue could reach $37 billion by 2027.

This would mean it would need to capture about half of this SAM, at the midpoint. This would still be a tall task, but these numbers include only three customers. Overall, there is a significant chance Broadcom could sustain a powerful +40% AI growth rate for multiple years.

The company also has a non-AI chip business that is almost as large as its AI-chip business. This business has been shrinking, and so has the non-AI chip industry overall. But, the semiconductor industry is cyclical, so there is a strong chance of a significant recovery.

Broadcom’s Software Business Proves It’s Not a One-Trick Pony

Some say Broadcom’s massive growth in software isn’t impressive. They argue it only happened because Broadcom paid $69 billion for VMware. While that is somewhat true when comparing overall software revenues from 2023 to 2024, it is a vast oversimplification.

VMware’s revenues came onto the books in Q1 2024, causing Broadcom’s software revenues to increase by 153% versus Q4 2023. However, with the company’s Q1 2025 earnings release, we can see how well Broadcom grew its software revenues organically. They did a fantastic job, with Broadcom increasing software sales by 47%.

This is due to key changes the company has made at VMware, and it has more to achieve with VMware. It is still working to shift the remaining 40% of customers to its higher revenue subscription model.

The VMware acquisition shows how good the company is at spotting and fixing struggling businesses. This has been part of the company’s playbook for years now. Once Broadcom reduces the massive debt load it took on from VMware, the firm could be in a great position to do so again.

This possibility is another reason to be confident in Broadcom’s long-term chances of continuing to appreciate.

Broadcom: Strong Outlook and Execution Point to Good Things on the Horizon

The moment when Broadcom was a generational investment might be gone, but the stock still shows great promise. The company’s path to continued and strong growth is not theoretical, but entirely possible.

Also, management’s impressive ability to acquire and reinvigorate companies like VMware can create long-term opportunities that are not considered today.

Yes, the stock trades at a high multiple, but for good reason. The 28x forward P/E ratio is not outrageous. For long-term growth, Broadcom remains a buy.

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