Microsoft earnings preview

As Microsoft prepares to release its next earnings report, analysts are closely watching for updates on its cloud services performance and AI contributions. Last quarter, the company revealed that AI services contributed 7 percentage points to the growth of its Azure and other cloud services revenue, up from 6 percentage points in Q2 and 3 percentage points in Q1. This reflects a growing trend of AI’s impact on Microsoft's business. Investors will be keen to see if this momentum continues and how it affects overall financial performance.

Additionally, Microsoft’s recent success has been reflected in its stock price, which has risen 13% year to date. The earnings report will provide further insight into the sustainability of this growth and the effectiveness of Microsoft’s AI and cloud strategies. Analysts will also be comparing these results with recent reports from competitors like Alphabet, which have highlighted similar trends in AI-driven revenue increases.

Microsoft to report fiscal Q4 earnings

The report will cover the three months ended June 30, 2024, the fourth quarter of the company’s 2024 fiscal year. Some of the key benchmarks to watch:

• Wall Street analysts, on average, expect $64.36 billion in revenue, up 14.5% from a year ago, toward the high end of the company’s guidance.
• Analysts expect earnings of $2.70 per share, up slightly from $2.69 a year ago.
• Microsoft said previously that it expected 30% to 31% growth in its Azure cloud business for the quarter.

Microsoft (MSFT) will report its fiscal fourth quarter earnings after the bell on Tuesday as Wall Street continues to look for signs that the massive wave of AI investments among Big Tech firms is starting to pay off.


For the quarter, Microsoft is expected to report earnings per share of $2.94 on revenue of $64.5 billion, according to data compiled by Bloomberg. Microsoft reported EPS of $2.69 on revenue of $56.2 billion during the same period last year.

Cloud revenue is expected to come in at $36.8 billion with Intelligent Cloud revenue, which includes Azure, set to hit $28.7 billion.

In the previous quarter, Microsoft reported that AI services added 7 percentage points to the growth of its Azure and other cloud services revenue. This is an increase from 6 percentage points in Q2 and 3 percentage points in Q1. The company started disclosing AI contributions in Q4 of the previous year, when AI was credited with 1 percentage point of growth for Azure.

Microsoft's shares have risen by 13% year to date

Microsoft’s report comes on the heels of Alphabet’s (GOOG, GOOGL) earnings announcement last week. Alphabet noted an increase in cloud revenue, attributed in part to growing interest in AI products. However, Google did not provide specific figures on AI's impact on its cloud business. This omission led analysts such as Stephen Ju from UBS Global Research to speculate that significant revenue gains from Google's AI investments might not materialize until the first half of 2025 at the earliest.

In other areas of Microsoft's business:

• the company has forecasted revenue growth of 9% to 11% for the Productivity and Business Processes segment in the June quarter. This division, which encompasses Office and related products, is expected to generate between $19.9 billion and $20.2 billion in revenue.
• Consistent with recent patterns, the Intelligent Cloud division is projected to see the highest revenue growth, with an anticipated increase of 19% to 20%. This segment's revenue is expected to fall between $28.4 billion and $28.7 billion, according to Microsoft's guidance.

The impact of Microsoft earnings report

Microsoft's earnings report has a significant impact on both the company and the broader market. Analysts will closely scrutinize the results for insights into the company’s cloud services and AI-driven revenue growth.

A strong performance, especially in the Intelligent Cloud division, could reinforce Microsoft's position as a leader in the tech industry and potentially boost its stock price further. Positive results could also signal broader trends in the technology sector, influencing investor sentiment across the market.

Unlike many other tech firms, Microsoft typically avoids releasing unexpected news or details on earnings day that diverge from investor forecasts, reflecting the stable, non-cyclical nature of its software business. Analysts anticipate that the company will report quarterly revenues of $64.4 billion, which is in line with its Fiscal Q3 guidance of up to $64.5 billion.

Last week, investors showed discontent with the substantial AI expenditures reported by Google and Tesla. The Nasdaq experienced its worst day of 2024 following the second-quarter earnings announcements from these "Magnificent Seven" companies. Tesla's investors were troubled by a significant drop in profit margins, largely attributed to its heavy AI investments.

Meanwhile, Google’s stock faced a selloff due to sluggish growth in its YouTube division and concerns about the delayed financial benefits of its AI spending. This decline occurred despite Google executives highlighting that their Gemini AI tools contributed to a record-high revenue for Google Cloud and that AI enhancements for Search drove increased revenue in that area. The earnings report will be a key indicator of Microsoft's ongoing success and its ability to leverage AI for continued growth.

When considering shares, indices, forex (foreign exchange) and commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss.

Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.