What to Expect from Microsoft With Earnings On Deck (NASDAQ: MSFT)

Microsoft‘s earnings come on a busy day for the street, with the financials after today's close likely to attract plenty of attention. Microsoft's stock price (NASDAQ: MSFT) has taken a 1% hit leading into the print, with markets set aback by negative U.S GDP figures on the day.

Consensus expectations are that Microsoft will report Earnings Per Share (EPS) of $3.21, a respectable 9.5% increase year-over-year, on revenue of $68.43 billion, representing a 10.6% rise. The linchpin for achieving, and ideally surpassing, these figures lies within the Intelligent Cloud segment.

Analysts project this division to generate $26.13 billion in revenue, an 18% year-over-year jump, with Azure's constant currency growth keenly watched.

Trading just under $390, the technology giant has once again seen the stock rally off support in recent sessions, with 5 out of the past 6 trading days closing positive, and bringing gains of 9.72% over the period. Despite the recent bounce, the stock remains firmly in the red on the year, down 6.85% YTD, and has managed a meagre 0.1% gain over the past 12 months.

This underperformance reflects a challenging start to 2025 for many tech giants, buffeted by macroeconomic headwinds, sector-wide profit-taking, and specific concerns around global trade dynamics.

Microsoft's history offers some comfort; the company has exceeded EPS estimates in eight of the last ten quarters. However, the market's reaction post-earnings has historically been volatile. Data suggests the stock has declined following earnings announcements in 55% of cases over the past five years, with a median one-day drop of 3.8%.

Options markets are pricing in a potential ±4% move following today's announcement, signalling heightened trader anticipation and uncertainty.

Recent Analysis and Technical Picture

Fueling both optimism and anxiety is Microsoft's aggressive multi-billion dollar investment push into AI. The integration of Copilot features across its software suite and the expansion of the Azure OpenAI Service (reportedly contributing ~10% to Azure revenue) are seen as significant long-term growth drivers. However, the $80 billion annual AI investment figure raises near-term questions about capital expenditure intensity and margin impact, especially amid GPU shortages that reportedly delayed GPT-4.5. A recent strategic pivot, involving the cancellation of some data center leases to prioritize AI-specific infrastructure, highlights this focus but initially spooked some short-term investors.

Analyst sentiment remains broadly positive, however, recent target price revisions reflect the prevailing caution. Wedbush Securities, for instance, lowered its price target from $550 to $475, acknowledging tariff risks while reaffirming faith in long-term AI monetization.

Goldman Sachs adjusted its target to $450 from $500, citing macroeconomic uncertainty but praising Microsoft's resilience compared to more cyclical tech peers. Microsoft's EPS estimate saw a slight trim over the past month, reflecting cloud capex concerns.

From a technical standpoint, the picture is mixed. While short-term indicators like the 10-day Simple Moving Average (SMA) crossing above the 20-day SMA suggest bullish momentum, a more ominous “death cross” persists, with the 50-day SMA ($387.17) languishing below the 200-day SMA ($414.21). This longer-term bearish signal often precedes extended weakness.

While short-term headwinds from trade tensions and normalised cloud growth rates persist, the company's strategic positioning in AI, coupled with its foundational strength in enterprise software and cloud, provides a compelling long-term narrative.

Management's commentary on Azure's growth trajectory, concrete examples of AI contributing to the top and bottom lines, capital expenditure plans, and any strategies to mitigate potential tariff impacts, will be closely watched. A strong beat and confident outlook, particularly around AI adoption and Azure stability, could propel the stock towards resistance levels and potentially reignite its upward trend. Conversely, any perceived weakness or cautious guidance could validate bears' concerns and technical warnings, potentially leading to a test of support levels.

With a consensus price target pointing towards $492, the street largely believes the long-term potential outweighs the near-term risks. However, today's earnings report will be a crucial validation point for that thesis.