Microsoft (MSFT) Earnings Preview: Can AI Fuel Continued Growth?

All eyes are on Microsoft (MSFT) today as the tech giant prepares to release its fiscal first-quarter 2026 earnings report after market close. The street is buzzing with anticipation, eager to see if Microsoft can maintain its impressive growth trajectory. The current stock price sits just shy of $544, up 4.31% in the last five days, having hit new highs ahead of earnings.

Analysts are projecting earnings per share (EPS) of $3.66 and revenue of $75.39 billion for the quarter. These expectations are fueled by Microsoft's significant strides in AI and cloud computing, which have been key drivers of growth in recent quarters. The stock's performance year-to-date reflects this optimism, with MSFT having put up gains of 29.5% since the beginning of the year.

Microsoft's success in monetizing its AI investments has been nothing short of remarkable. The company's AI segment has experienced explosive growth, with a reported 175% year-over-year increase, translating to a staggering $13 billion run rate. This surge underscores Microsoft's leadership position in enterprise AI adoption and its ability to translate research and development into tangible revenue streams. The markets will be closely scrutinizing the earnings report for further details on AI-related revenue and future growth prospects.

Beyond the specifics of Microsoft's business, macroeconomic factors are also poised to play a significant role in shaping market sentiment. The Federal Reserve's upcoming meeting, where a quarter-point interest rate cut is anticipated, could have a substantial impact on market dynamics. Lower interest rates could boost market confidence and further fuel the rally in tech stocks. However, they could also signal concerns about the overall health of the economy, potentially offsetting any positive sentiment.

Trade talks progressing between the U.S and China are another factor that has helped push markets to highs recent days. How much is now already priced in?

What to Watch For in the Earnings Report

• AI Revenue Breakdown: A detailed breakdown of revenue generated from AI-related products and services.
• Azure Growth Rate: The growth rate of Microsoft's Azure cloud computing platform.
• Operating Expenses: An analysis of operating expenses, particularly those related to AI investments.
• Guidance for Future Quarters: Management's outlook for future earnings and revenue growth.
• Q&A Session: The Q&A session with analysts, where management will address key questions and concerns.