Here’s what investors need to know

Microsoft is scheduled to report its quarterly results after markets close on Wednesday, and Wall Street analysts are anticipating another strong showing.

“We view MSFT as a front-runner on the large-scale enterprise AI front despite increasing competition from Amazon/AWS and Google/GCP,” Wedbush analyst Dan Ives wrote in a note last week.

Analysts expect Microsoft to report adjusted earnings growth of 11% to $3.68 per share in the first quarter of fiscal 2026, according to estimates compiled by Visible Alpha. Wall Street is looking to increase revenues from Azure, Microsoft’s cloud computing platform, by about 38% to about $23 billion, while total revenues are expected to rise by 15% to $75.5 billion.

Analysts are optimistic about cloud growth

Many analysts say anecdotal evidence points to a stronger quarter than Wall Street expects.

The feedback Deutsche Bank analysts received from Microsoft clients “reflects an overwhelmingly positive consensus on Microsoft’s fundamental and competitive position,” they wrote in a note on Thursday. Citi analysts also noted that their conversations with Microsoft partners have been surprisingly positive, with corporate and public customers citing strong demand for Azure.

Bank of America analysts expect total first-quarter revenue to reach $77 billion, but expect up to 1% upside to that estimate, “driven by workload migration to Azure, security and application strength.” Wedbush agreed, calling Microsoft’s 37% Azure growth forecast “relatively conservative.”

The focus will be on artificial intelligence investments

Microsoft issued a very strong earnings report in July, when it beat top and bottom line estimates and indicated that demand for cloud computing continued to outpace supply. To meet this demand, the company estimates it will spend $30 billion on infrastructure in the fourth quarter.

Microsoft’s infrastructure spending will be one of the most closely watched numbers in this week’s results. Its spending on cloud data centers and artificial intelligence has fueled explosive sales growth at chip maker Nvidia (NVDA). Earnings this week from Microsoft and big tech peers Alphabet (GOOG), Amazon (AMZN) and Meta (META) will give Wall Street insight into the strength of the quarter for Nvidia and other AI infrastructure vendors.

Bank of America analysts expect Microsoft’s total capital expenditures for the full year to reach $125 billion, $10 billion more than Wall Street forecasts. “We are optimistic about Microsoft’s upward CAPEX revisions, which will likely be a catalyst for the stock,” the analysts wrote.

Microsoft stock is in a slump

Microsoft shares have been treading water since their last quarter earnings report came out. The stock is down about 2% since the end of July, while the Nasdaq Composite is up about 10%.

Bank of America attributes the weak performance to a shift in “AI infrastructure momentum away from Microsoft (to Oracle),” which last quarter reported a huge jump in orders from Microsoft-backed OpenAI. Saying that infrastructure spending will exceed previous estimates could help Microsoft regain that momentum, according to Bank of America.

Uncertainty about Microsoft’s relationship with OpenAI has been a drag on the stock, according to Deutsche Bank. The two companies last month signed a non-binding memorandum of understanding to expand their partnership, but there is still much to be negotiated, including Microsoft’s access to OpenAI’s intellectual property and programming interfaces, as well as how ownership of OpenAI’s for-profit division will be structured.

“How things might change across these key pillars is unclear, but we think skeptics are underestimating Microsoft’s strong value-extracting position here,” Deutsche Bank’s Brad Zelnick and Bhavin Shah wrote.