TLDR
- Microsoft reports fiscal Q1 results Wednesday after the close, with MSFT closing Tuesday at $531.33, down 0.24%.
- Analysts expect adjusted EPS of $4.71 on revenue of $90.62 billion (FactSet), 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.
- Capital spending is expected at $46 billion to $51 billion, while free cash flow could fall 69% to $7.99 billion.
- Microsoft is offering voluntary exits to about 60,000 employees, and this is its first report under the new two-segment structure.
Microsoft (MSFT) stock closed at $531.33 on Tuesday, down 0.24%, and edged lower to $530.10 in premarket trading Wednesday. The company reports fiscal first-quarter earnings after the close.
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, though, 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 posted $4.13 per share on revenue of $77.67 billion. Bloomberg’s consensus is lower on earnings, at $4.27 per share, with revenue at $90.6 billion.
The number most people will check first is Azure. Wall Street expects growth of 44.3%, up from 43% last quarter.
Azure is how Microsoft earns money from its AI spending. It rents out computing power, storage and other AI infrastructure to clients.
Spending and cash flow in focus
Capital spending is the other pressure point. FactSet expects $51 billion for the quarter, a $10 billion jump from the prior one. Bloomberg’s estimate, which includes leases, is $45.9 billion, up from $19.3 billion a year ago.
That spending has cut into cash. Free cash flow is expected to be $7.99 billion, down 69% from $25.7 billion a year earlier.
Chris Brigati, chief investment officer at SWBC, said the focus for megacap tech “is less about the actual earnings results than about whether the Capex spending for AI growth will translate into sustainable revenue growth.”
Higher-than-expected cloud growth could ease some of the worry over the spending. Some shareholders have questioned how much Microsoft is putting into its AI buildout.
On Monday, Microsoft confirmed it is offering voluntary exit packages to about 60,000 employees. The company says it is looking to bring down costs.
A new look to the report
This is the first report under Microsoft’s new structure. The old three segments are gone, replaced by Agents and Infra, and Devices and Consumer.
Agents and Infra includes Azure, Microsoft 365 cloud services, server licensing, industry solutions and frontier and support services. Bloomberg expects revenue there to rise 22.5% to $75.6 billion.
Within that segment, Azure is forecast at $32.2 billion and Microsoft 365 at $27.4 billion. Analysts polled by FactSet put Azure at $32.3 billion. It is also the first report to show Azure revenue in dollars, not just percentage growth.
Devices and Consumer, which covers search, advertising, Xbox and Windows OEM, is expected to fall 6% to $15 billion.
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 quarters.
Investors will also watch remaining performance obligations, which are booked contracts not yet turned into revenue. Analysts expect $705.6 billion, up 77% from $389 billion a year ago.
Copilot growth is also on the watch list. Microsoft reports after the bell Wednesday.
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