Microsoft Earnings Preview: Cloud Services and Artificial Intelligence Take Center Stage

• Analysts project Microsoft's revenue for the quarter to come in at $60.86 billion, down slightly from the previous quarter but up 15.14% from the year-ago period.

• Earnings per share (EPS) are expected to be $2.83, compared with $2.93 in the prior quarter and $2.45 a year earlier.

• Investors will likely be watching for Microsoft's cloud segment growth, which drove an earnings beat in the second quarter.

• Microsoft could also provide updates about its artificial intelligence (AI) projects, with analysts noting that the company could be well-positioned for AI-driven growth.

Investors will likely be watching for growth in Microsoft's intelligent cloud business after the segment fueled the company's second-quarter earnings beat.

Analysts at CFRA estimated that revenue for the entire Intelligent Cloud segment could grow by 19% driven by Azure, Microsoft's cloud platform, which the firm expects to grow 29% with AI contributing at least six to eight percentage points to this growth.

The analysts said that they "expect greater AI contribution while MSFT also laps greater workload optimization levels seen by enterprise customers a year earlier" and noted that the firm anticipates the pace of recent growth is sustainable.

Bank of America analysts wrote that they "believe that Microsoft is well positioned to generate sustained low double digit growth in the coming 3-5 years," led by continued adoption of the Azure cloud infrastructure platform and its cloud based Office 365 productivity suite, among other things.

Sharing similarly bullish remarks, Citi Research analysts said they remain bullish on MSFT ahead of the Q3 print as their quarterly inputs “point to strengthening Azure growth trends boosted again by AI services, with solid CoPilot interest, though more bite-sized deals initially.”

Microsoft could also provide updates about its AI initiatives as the company has established itself as an early leader in the AI boom with its partnership with ChatGPT maker OpenAI.

CFRA analysts wrote that they expect greater AI contributions and momentum, suggesting AI "will support double-digit growth through CY 2025 and multiple expansion potential."

The CFRA analysts noted Microsoft could be well-positioned for AI-driven growth, writing the company "can monetize AI-related revenue quicker than any other cloud/software provider," especially with its OpenAI partnership.

Bank of Amercia analysts suggests that Microsoft's next growth catalyst will likely stem from significant AI-related product advancements, such as increased M365 Copilot users or rising Commercial Office ASP.

Wedbush analysts said that they "strongly view this as Microsoft's 'iPhone Moment' with AI set to change the cloud growth trajectory in Redmond the next few years." They added that they believe deployment of Copilot, Microsoft's AI assistant, could add between $25 billion and $30 billion to the company's top line by 2025.

Source: Investing, Business Insider