After a challenging performance in 2024, all eyes are on Microsoft as the tech giant prepares to announce its fiscal Q3 earnings results later today. Josh Gilbert, Market Analyst at eToro, says investor attention is firmly fixed on the company’s ability to turn its AI ambitions into meaningful revenue, along with its cloud growth and capital expenditure plans. Following strong results from Alphabet earlier this week, expectations are riding high.
A key focus for the market will be Microsoft’s capital expenditure (CapEx) and data centre investment strategy. The company previously announced plans to invest up to USD 80 billion through the fiscal year, with a focus on AI development and cloud infrastructure. However, recent reports of Microsoft backing away from some new data centre projects have raised questions about underlying demand. Commentary from Microsoft on how demand is holding up will be critical for shares.
“Microsoft is spending big, but it’s what’s needed to stay ahead,” Josh Gilbert, Market Analyst at eToro, commented. “It’s also worth remembering that the company has the balance sheet to support these investments, with its cash pile expected to hit USD $78 billion this quarter.”
The company raised its dividend by 10% last year—marking 15 consecutive years of dividend growth. While CapEx may impact margins in the short term, Microsoft’s ability to consistently generate high returns on capital and deliver robust revenue growth continues to underpin investor confidence.
For the quarter, analysts expect revenue of USD $68.5 billion (up 11% year-over-year) and earnings of USD $3.21 per share. Microsoft has a strong track record of beating expectations, having missed earnings only once since 2016. However, the spotlight will be on Azure, Microsoft’s cloud computing platform, which is forecast to grow 30% in constant currency. With commercial bookings strong and OpenAI likely contributing more this quarter, an upside surprise in Azure could propel the stock higher.
Although the focus is on AI and cloud, the market will also be listening closely for any commentary regarding broader economic concerns, including the impact of global tariffs and a potential slowdown in enterprise demand. Insights into PC sales, Office product performance, and the gaming segment will also be key.
Microsoft’s Q3 earnings will serve as a major checkpoint for investors assessing the trajectory of the tech sector’s AI transformation. For long-term investors, the company’s bold investments may take time to materialise—but the foundations for future growth remain strong.
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