Microsoft Bulls Lead Big Buyers of Magnificent Seven Call Options
$Microsoft(MSFT)$
At 11:06:12 a.m., an active buyer paid a $125.5 million premium for call options that give the holders the right to buy 2.6 million Microsoft shares at $400 each by Aug. 15. That's the biggest block trade posted so far among contracts tied to the Magnificent Seven stocks that also include $NVIDIA (NVDA.US)$, $Tesla (TSLA.US)$, $Apple (AAPL.US)$, $Meta Platforms (META.US)$, $Amazon (AMZN.US)$, and $Alphabet-A (GOOGL.US)$.
The tech giant also reaffirmed its outlook for continued growth in capital expenditures amid the build out of AI infrastructure. That eased investor concerns that companies would cut back on spending amid macroeconomic uncertainty as a result of President Donald Trump's sweeping tariffs.
Microsoft options volume more than tripled as the stock jumped 8.6% to $429.34, helping push many of the call options to the group of contracts that are now in the money. The rally came after the tech giant's revenue growth accelerated faster than analysts expected, driven by robust demand from artificial intelligence applications.
Microsoft Chief Financial Officer Amy Hood said said the company's CapEx “will grow at a lower rate than FY '25 and will include a greater mix of short-lived assets, which are more directly correlated to revenue than long-lived assets.”
"These investments, along with focused execution that delivers near-term value to our customers, will ensure we continue to lead through the cloud and AI opportunity ahead," Hood said during the company's earnings call late Wednesday.
AI services contributed 16 percentage points of the 35% growth in Azure revenue during the company's fiscal third quarter, helping Microsoft's top and bottom line surpass analysts' expectations.
Revenue for the three months ended March 31 grew 15% to $70.07 billion, better than the 11.6% gain expected by analysts, according to Bloomberg consensus. Earnings jumped 19% to $3.46 a share, exceeding the average estimate that called for $3.21 a share.
For the fiscal fourth quarter, revenue for Intelligent Cloud including Azure was forecast by Microsoft to grow more than 20% to between $28.75 billion to $29.05 billion. The midpoint of that range is higher than the $28.2 billion average estimate of analysts, according to Bloomberg consensus.
Morningstar analyst Dan Romanoff raised his fair value estimate on Microsoft to $505 per share, from $490, adding that the stock looks attractive and remains one of his team's top picks.
"We see results reinforcing our long-term thesis, which centers on the expansion of hybrid cloud environments, the proliferation of artificial intelligence, and Azure,” Romanoff wrote in a note to clients Thursday. “Demand for Azure AI services is surging, which is a long-term positive. While Azure remains capacity constrained, AI performed better than internal expectations while traditional workloads rebounded.”
All the four biggest block trades involved Microsoft call options. The fifth one covered Nvidia call options, with an active buyer paying a $4.99 million premium for contracts that give the holder the right to purchase 144,000 shares of the AI-chip giant at $110 each in 777 days.
Apple, Amazon, Meta and Tesla all saw bullish block trades with premiums of more than one million dollars. In the case of Alphabet, the biggest block trade was bearish, involving an active seller collecting an $836,400 premium for call options that give the holder the right to buy 170,000 shares at $170 by July 18.
The biggest options block trade seen in Microsoft boosted the volume of those $400 calls expiring in 106 days to 31,820 contracts so far. That’s more than 17 times the open interest of 1,860. Each contract represents 100 shares.
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