Microsoft (MSFT) Stock: Earnings Day — What Investors Should Know

TLDR

• Microsoft delivers fiscal Q2 2026 earnings Wednesday with Wall Street forecasting $3.91 EPS and $80.3 billion revenue
• Azure cloud growth expected at 38.4%, slightly down from Q1’s 40%, with some analysts predicting upside surprise
• Company spent $34.9 billion on capex in Q1 and plans faster spending increases in fiscal 2026
• Memory cost increases may limit guidance as AI component demand exceeds supply
• Stock trades at 28.5x forward earnings, a discount to five-year average, with Strong Buy consensus rating

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Microsoft releases fiscal second-quarter earnings Wednesday after the closing bell. Analysts project earnings of $3.91 per share on revenue of $80.3 billion.

Microsoft Corporation, MSFT

The company earned $3.23 per share on revenue of $69.6 billion in the year-ago period. Microsoft has topped earnings estimates in nine consecutive quarters.

Shares closed Tuesday at $480.58, gaining 7.5% over the past year. The stock is up roughly 7% in 2025 but trades 14% below its October all-time high.

Three key themes will dominate investor attention. Azure cloud performance comes first. AI infrastructure investment ranks second. The core software business health matters third.

Azure Performance Under the Microscope

Wall Street expects Azure revenue growth of 38.4%. That represents a modest slowdown from last quarter’s 40% expansion.

Stifel analyst Brad Reback sees potential for a positive surprise. He predicts Azure growth about 200 basis points above consensus estimates.

Strong economic conditions and rapid OpenAI usage support his view. Management previously stated demand exceeds Azure supply. Reback maintains a Buy rating with a $520 price target.

Azure now ranks among the top platforms for AI application development. The service offers access to multiple generative AI models.

Microsoft holds a major ownership position in OpenAI, ChatGPT’s creator. Azure also supports X’s Grok, Meta’s Llama, and Anthropic’s Claude models.

New data centers in Atlanta and Wisconsin will boost capacity. UBS analyst Karl Kierstead highlighted this expansion while keeping his Buy rating.

AI Investment and Rising Costs

Capital spending reached $34.9 billion in the first fiscal quarter. That figure beat Wall Street expectations.

CFO Amy Hood told investors in October that capex would accelerate in fiscal 2026 versus fiscal 2025. Management’s commitment to that forecast will indicate their confidence in AI demand.

Options market pricing suggests a 5.41% post-earnings move in either direction. Big Tech companies are racing to build AI infrastructure as demand climbs.

Memory costs present a growing headwind. Prices have jumped as AI component demand outstrips supply.

Raymond James analyst Andrew Marok expects memory costs to limit guidance upside. He rates the stock Outperform with a $600 target.

Marok wrote that capacity constraints will likely cap investor enthusiasm around Azure growth numbers. He maintained his positive rating despite this concern.

Valuation and Analyst Views

Several analysts recently trimmed price targets. UBS reduced its target to $600 from $650. Cantor Fitzgerald, Wells Fargo, and Mizuho Securities also cut targets.

All firms kept Buy-equivalent ratings. The adjustments reflect software sector valuation pressure rather than Microsoft-specific weakness.

Shares trade at 28.5 times forward earnings. That’s below the five-year average of 31.5 times. The stock traded above 32 times forward earnings before October.

Raymond James analyst Andrew Marok downplayed AI concerns about traditional software. He called M365 mission-critical for enterprises. Most companies would need major internal changes to switch platforms.

Microsoft’s Copilot tool within Office continues gaining users. Azure remains the centerpiece of the AI strategy though.

Wall Street maintains a Strong Buy consensus. Thirty-two analysts rate it Buy while two say Hold.

The average price target sits at $626.14. That implies 34% upside from current levels.

Microsoft launched its Maia 200 accelerator Monday. The chip represents the second generation of its in-house processor technology.

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