Microsoft Q3 Earnings Preview — Can Strong Results Restart the MSFT Stock Rally?

Microsoft (MSFT) is acceptable to study its fiscal third-quarter results connected April 29. Although the banal has recovered immoderate caller losses arsenic large tech shares rallied, it remains astir 12% little for the year, pressured by dense spending connected AI infrastructure and rising competition. MSFT besides trades beneath its humanities valuation multiples, but it inactive needs to beryllium AI monetization and sustained maturation to thrust a meaningful re-rating. Despite the caller weakness, Wall Street remains highly bullish, with analysts maintaining a Strong Buy standing and projecting astir 36% upside from existent levels.

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For context, Microsoft develops software, unreality services, and AI solutions, including Windows, Office, Azure, and AI tools similar Copilot, serving businesses and consumers worldwide.

What to Expect from Microsoft’s Q3 Results?

For Q3, analysts expect Microsoft to study net per stock (EPS) of $4.06 connected gross of $81.3 billion, up from $3.46 per stock and $70.1 cardinal successful the aforesaid play past year.

Even though gross and profits are expected to turn twelvemonth implicit year, investors volition beryllium intimately watching Microsoft’s AI spending plans. The cardinal question is nary longer whether Microsoft tin payment from AI demand, but however agelong it volition instrumentality for those dense AI investments to commencement paying off.

Overall, Azure remains the astir important metric, arsenic investors privation impervious that unreality maturation is staying beardown portion Microsoft continues to walk heavy connected AI infrastructure. Copilot is different cardinal focus, arsenic investors are looking for signs that its AI products are generating existent concern value. Below is simply a screenshot showing Microsoft’s operating income breakdown crossed segments implicit the past fewer quarters.

Analysts Stay Bullish connected MSFT Ahead of Earnings

Most recently, TD Cowen expert Derrick Wood repeated his Buy standing connected MSFT. He believes Microsoft’s Office 365 concern volition turn faster due to the fact that much companies are expected to commencement utilizing Copilot, the company’s AI assistant.

Wood besides pointed to caller merchandise bundles and pricing plans, similar the upcoming E7 bundle and Copilot Cowork offering, which could promote much customers to wage for Copilot. Over time, this should assistance Microsoft gain much gross from each customer.

Meanwhile, Evercore expert Kirk Materne said capitalist sentiment astir Microsoft could amended this quarter, but unless Azure maturation comes successful overmuch stronger than expected, the net study volition apt beryllium much astir staying connected way than creating large excitement. Materne added that it would beryllium “good enough” if Microsoft reports Q3 FY26 Azure maturation astatine the higher extremity of its guidance, astir 38% oregon more, particularly since the institution faces pugnacious comparisons from the erstwhile quarter.