Microsoft is set to announce its fiscal first-quarter earnings later today, with Wall Street expecting another solid performance fuelled by artificial intelligence investments and robust demand for its Azure cloud platform.
Analysts forecast revenue of $75.4 billion and adjusted earnings per share of $3.67, according to FactSet.
That would mark a 15% year-on-year increase, reflecting steady growth across its enterprise and cloud segments.
In the same period last year, Microsoft posted $65.6 billion in revenue and $3.30 in earnings per share.
Microsoft is coming off its “best print in recent memory,” Jefferies analyst Brent Thill said.
The company’s fiscal 2025 results showed total revenue of $281.7 billion, up about 15% from the previous year, while net income rose to $101.8 billion.
Microsoft’s earnings announcement will closely follow the company’s market capitalisation exceeding $4 trillion.
However, despite its shares climbing more than 29% this year, analysts are bullish on further upside.
Azure remains the cornerstone of AI-led growth
The key figure to watch is Azure’s performance, as investors seek confirmation that demand for AI-driven workloads and cloud infrastructure remains resilient.
Azure, bolstered by its integration with OpenAI and enterprise adoption, continues to be the key driver of Microsoft’s growth.
Microsoft’s Intelligent Cloud division, which includes Azure, is expected to generate $30.2 billion in revenue — a 25% year-on-year increase.
Analysts estimate commercial cloud revenue could reach $48.6 billion, up from $38.9 billion last year.
Azure revenue itself is forecast to climb by 37.4%, just shy of the 39% growth reported last quarter.
Yet analysts say AI momentum remains strong, with Azure’s contribution from AI services expected to rise to 18.7% from 12% previously.
“In our view, the risk/reward on near-term Azure growth skews positive,” said UBS analyst Karl Keirstead, noting improved sentiment from enterprise customers and robust demand for AI infrastructure.
“The tone from enterprise customers and partners has improved again, with large Azure partners citing accelerating growth trends. On the AI/GPU front, demand trends from OpenAI in particular appear to be strong and Microsoft is standing up incremental AI [infrastructure] capacity,” Keirstead added.
Thill sees the potential for the company to beat consensus expectations for 38% Azure growth in Wednesday’s report.
The September quarter is seasonally the weakest for Microsoft, Thill said, but he thinks AI can overshadow that.
Analysts lift targets as AI demand boosts confidence
Microsoft’s shares have surged more than 29% this year, far outpacing the S&P 500, as investors bet on the company’s central role in the AI boom.
Guggenheim upgraded the stock to “Buy” from “Neutral,” setting a price target of $586 — an 8% upside from Tuesday’s close, saying it was “clear” that Microsoft, along with other large cloud providers, is a major beneficiary of the AI boom, particularly through its Azure cloud platform.
HSBC analyst Stephen Bersey raised his price target to $648, citing accelerating Azure adoption.
“We believe the AI build-out is accelerating, and Microsoft Azure is likely to continue to benefit,” Bersey said, projecting 46% annual Azure growth through fiscal 2027.
On Tuesday, Microsoft and OpenAI deepened their partnership, announcing that OpenAI’s for-profit subsidiary will convert into a public-benefit corporation, with Microsoft taking a 27% stake.
OpenAI will also purchase an additional $250 billion in Azure services over time — further cementing Microsoft’s dominance in AI cloud infrastructure.
A robust balance sheet underpins expansion
Microsoft’s financial fundamentals remain among the strongest in the tech sector.
The company’s trailing twelve-month revenue stands at $281.72 billion, with a three-year growth rate of 12.8%.
Its operating margin of 45.62% and net margin of 36.15% underscore operational efficiency and profitability.
The company maintains a current ratio of 1.35 and a debt-to-equity ratio of 0.18, signaling strong liquidity and low leverage.
Analysts say this balance sheet strength gives Microsoft flexibility to sustain heavy AI-related investments.
However, some analysts note the need to monitor insider selling, even as the firm’s Altman Z-Score of 10.36 signals strong financial stability.
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