Microsoft is expected to report its fourth-quarter earnings after the bell on Wednesday. Here's what you need to know.
NET INCOME: The company is expected to report a profit of $31.49 billion, according to analysts polled by FactSet. That compares with a profit of $27.23 billion in the same period last year.
ADJUSTED EARNINGS: Analysts expect adjusted earnings of $4.24 a share, compared with $3.65 a share a year earlier.
REVENUE: Revenue is expected to grow to $87.62 billion, up from $76.44 billion last year.
Shares in Microsoft were recently up 2.3% at $398.06 on the day. The stock is down 18% this year.
WHAT TO WATCH:
--Two key metrics likely to drive investor reaction to Microsoft's print are capital expenditures and free cash flow. Both Tesla and Alphabet saw their stocks slide last week after posting negative free cash flow due to artificial-intelligence spending, as well as Alphabet's raised 2026 capex view. This, along with IBM's recent profit warning, have likely tempered investor expectations of Microsoft, and analysts estimate positive free cash flow of about $16.97 billion from the company. Still, said Oppenheimer analysts in a recent note, "Microsoft needs to sustain elevated Capex growth as it ramps spending to support AI workloads across its Azure and M365 businesses," adding, "Investors are increasingly focused on Microsoft's return on invested capital during the Capex spree, and Capex efficiency ratios are unlikely to improve near-term." (edited)
--The questions around Microsoft's spending feed into a broader debate about its returns from its heavy AI investments. Morgan Stanley analysts wrote that sentiment around Azure should benefit from incremental supply increases, while a confluence of factors including seats and consumption pricing should boost Copilot. "Azure and Copilot are key to the stock and both appear set to inflect," they write. UBS analysts, on the other hand, see possible limits for upside on Azure guidance, driven by external customer-capacity constraints and token-optimization efforts. Still, even a solid quarter for the business may not completely clarify sentiment around Microsoft, Oppenheimer analysts wrote: "Investor concerns over Capex growth and returns, AI disruption to the M365 franchise, increasing competitive pressures, and perception that management is playing catch-up in the AI market are unlikely to be resolved post the F4Q update."
Comments