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Q3 Earnings: Will MSFT Stock Or GOOGL Stock Break Out First?

With earnings due Oct. 26, Microsoft (MSFT) joins cloud computing giant Alphabet (GOOGL) on IBD Leaderboard. Fellow top tech stocks Nvidia (NVDA), ServiceNow (NOW) and Advanced Micro Devices (AMD) also make this list of leading stocks to buy and watch.




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MSFT stock was featured in this column on Sept. 27 as what it calls the “Great Reshuffle” continues to drive hybrid work trends — a mix of work-at-home and in-office environments. Along with fellow cloud giant Amazon.com (AMZN), Microsoft and GOOGL stock continue to tap into these long-term trends. The tech trio dominates cloud computing through Amazon Web Services (AWS), Microsoft Azure and Google Cloud.

With long-term track records of stable earnings growth, Microsoft, Alphabet and ServiceNow all earn a spot on IBD Long-Term Leaders.

Earnings Estimates: Microsoft Vs. Alphabet And Amazon

While Nvidia doesn’t release its next earnings report until mid-November, Microsoft and Alphabet report next week. Amazon reports Oct. 28.

After posting a 49% EPS increase last quarter, analysts expect Microsoft’s growth to slow to 14% in Q3. For 2021, Wall Street sees the cloud, software and video game giant generating 10% earnings growth.

Coming off a 189% EPS spike in Q2, analysts see Google parent Alphabet posting 65% growth in Q3. For the full year, consensus analyst estimates call for a 92% increase in earnings.

In terms of Q3 estimates, Amazon lags its fellow cloud giants, expecting a 28% decline in EPS growth after a 47% increase in Q2. But Wall Street sees Amazon full-year 2021 growth coming in at 26%.

Will MSFT Stock Win Cloud Competition To Break Out First?

With earnings due the same day, MSFT stock and GOOGL stock are both trading just below potential buy points. AMZN stock is also setting up, but is farther off a new entry as it tests support at its 10-week moving average.

Microsoft and Alphabet are both setting up flat bases. MSFT stock is building a second=stage base showing a 305.94 buy point. GOOGL stock is working on a third-stage chart pattern with a 2,925.17 entry.

Like AMZN stock, Microsoft and Alphabet are both above their 10-week lines.

As the stock market indexes try to build on a new uptrend, keep an eye on the relative strength line for Microsoft and other leaders to see if they are outperforming or lagging the general market.

While the RS line for Amazon stock has lagged, the relative strength lines for both Microsoft and Alphabet are within striking distance of a new high.

The focus, of course, for all three stocks right now is on upcoming earnings. While it’s risky to buy a stock just before it reports, a strong earnings report in a rebounding market has the potential to lift Microsoft, Alphabet and Amazon into new buy zones to match their lofty cloud ambitions.

Follow Matthew Galgani on Twitter at @IBD_MGalgani.

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