TLDR
- MSFT closed Tuesday at $531.33, down 0.24%, and traded at $530.10 premarket ahead of Q1 earnings after the close Wednesday.
- FactSet expects adjusted EPS of $4.71 on revenue of $90.62 billion, up from $4.13 and $77.67 billion a year ago.
- Azure growth is forecast at 44.3%, up from 43%, with Azure revenue expected near $32.3 billion.
- Capex is expected at $46 billion to $51 billion, and free cash flow could fall 69% to $7.99 billion.
- About 60,000 employees were offered voluntary exits, and this is the first report under the new two-segment structure.
Microsoft (MSFT) stock closed at $531.33 on Tuesday, down 0.24%. It slipped to $530.10 in premarket trading Wednesday ahead of the earnings report.
The company reports fiscal first-quarter results after the close. It is the first report under a new segment structure.
The stock is up about 10% this year, a little behind the S&P 500’s 13% gain. It has climbed about 35% since July after lagging for most of fiscal 2026.
FactSet analysts expect adjusted earnings of $4.71 per share on revenue of $90.62 billion. A year ago, Microsoft reported $4.13 per share on $77.67 billion.
Bloomberg’s consensus is lower on earnings, at $4.27 per share. Its revenue estimate is about the same, at $90.6 billion.
Azure and the AI spending test
Azure is the number most investors will check first. Wall Street expects growth of 44.3%, up from 43% last quarter.
Analysts polled by FactSet see Azure revenue of $32.3 billion. This is the first report to show Azure revenue in dollars, not just percentage growth.
Capital spending is the other pressure point. FactSet expects $51 billion for the quarter, up $10 billion from the last one.
Bloomberg’s estimate, which includes leases, is $45.9 billion. That compares with $19.3 billion a year ago.
Free cash flow is expected to fall 69% to $7.99 billion, from $25.7 billion. Heavy spending has eaten into the cash.
Chris Brigati of SWBC said the focus is “less about the actual earnings results than about whether the Capex spending for AI growth will translate into sustainable revenue growth.” Higher cloud growth could ease some of the worry.
New segments and the buyout offer
Microsoft now reports two segments: Agents and Infra, and Devices and Consumer. Agents and Infra is expected to grow 22.5% to $75.6 billion.
Bloomberg sees Azure at $32.2 billion and Microsoft 365 at $27.4 billion within that segment. Devices and Consumer is expected to fall 6% to $15 billion.
Remaining performance obligations are expected at $705.6 billion, up 77% from $389 billion. Analysts will use the figure to gauge future demand.
KeyBanc analyst Jackson Ader rates the stock Overweight with a $600 price target. He pointed to 31 data centers coming online in the fiscal fourth quarter, versus 57 in the first three.
On Monday, Microsoft confirmed voluntary exit offers for about 60,000 employees. The company is looking to bring down costs.
Investors will also watch Copilot growth. Microsoft reports after the bell Wednesday, with the stock at $530.10 in premarket trading.
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