Microsoft is preparing to announce its fiscal second-quarter earnings on Wednesday afternoon, with analysts anticipating an increase in both revenue and profits driven by robust demand in artificial intelligence (AI). Investors are eager to see how the tech giant’s stock will react, as options pricing indicates a potential swing of up to 5% in either direction following the report.
The company’s stock, which closed just under $481 on Tuesday, could rise to over $502 or dip to around $459 based on these projections. Notably, the shares have decreased approximately 11% since Microsoft’s last earnings report in October, where the company exceeded expectations but announced significant increases in its AI infrastructure investments. This had followed a record high closing price of about $542 prior to that announcement.
Heading into the earnings report, there remains a palpable concern among investors regarding Microsoft’s AI spending, which may overshadow the anticipated growth in earnings and revenue. Analysts point out that the company is projected to generate $80.31 billion in revenue for the second quarter, a 15% increase from the previous year. Revenue from the “Intelligent Cloud” segment, which encompasses Azure, is expected to see a 27% surge to $32.39 billion. Analysts estimate earnings per share could reach $3.87, up from $3.23 a year ago.
Morgan Stanley analysts, holding an “overweight” rating with a target price of $650, have communicated through their dialogues with Microsoft executives that Azure’s revenue is likely to continue its growth trajectory as more data center capacity becomes available this year.
The outlook for Microsoft remains predominantly optimistic, with 14 out of the 15 analysts tracked by Visible Alpha recommending to buy the stock, alongside just one neutral rating. The average target price of around $615 suggests nearly a 30% potential upside from the stock’s closing price on Tuesday.
Overall, while concerns about AI investments linger, the projected earnings and revenue growth could keep Microsoft firmly on the path toward recovery, indicating a positive outlook for the company in the competitive tech landscape.