TL;DR

Microsoft’s massive earnings growth is less about genuine innovation and more about masterful marketing. While shareholders cheer, the story’s underlying fragility mirrors past market crashes, suggesting a looming reckoning.

Story

Microsoft’s latest earnings report: a 17% revenue surge. Sounds impressive, right? But let’s dig deeper. This isn’t a story of innovation; it’s a tale as old as time – the triumph of hype over substance.

The mechanics are simple: they’re masters of marketing. They successfully packaged legacy products, slapped an ‘AI’ label on them, and watched the stock price soar. It’s like putting lipstick on a pig and charging a premium. Remember Enron? They were masters of creative accounting too, until the house of cards collapsed. This current market exuberance is eerily similar to the dot-com bubble.

The human impact? Well, for now, it’s mostly positive for shareholders. But the masses are left wondering why their savings aren’t growing at similar rates. There’s a growing income inequality reflected in these numbers. The average person isn’t benefiting from this tech boom, only the elite few at the top.

What are the red flags? An over-reliance on ‘cloud and AI’ buzzwords without concrete details. Remember, when companies use vague, all-encompassing terms, they’re hiding the specifics. Also, look at the reliance on constant currency. Often it’s a subtle attempt to mask slower growth in the core business. The fact that they exceeded expectations shouldn’t fool you—Wall Street’s expectations are often ludicrously low to start with.

In conclusion, Microsoft’s success reflects less of a revolutionary leap and more of a sophisticated PR campaign. History is littered with companies that grew too quickly and then fell just as fast. We’ve seen it happen before: 2008’s subprime crisis; the bursting of the dot-com bubble. This isn’t sustainable. When the next crisis hits, the consequences will be severe for those who bought into this hype.

Advice

Don’t chase hype. Scrutinize financial reports, look for specifics, not buzzwords, and remember that past market crashes offer valuable lessons—learn from history.

Source

https://www.reddit.com/r/investing/comments/1mdkott/microsoft_revenue_up_17_net_income_up_24/