Microsoft (MSFT) Stock: What to Expect Before Wednesday’s Earnings

TLDR

• Microsoft delivers Q2 fiscal 2026 earnings on January 28 with expectations of $3.91 per share, marking a 21% jump from last year
• Azure cloud platform drove 40% revenue growth in Q1, powered by AI demand and multi-model approach including ChatGPT, Grok, and Claude
• Stock trades at 28.5 times forward earnings, below its five-year average, after falling 14% from October highs
• Analysts maintain Buy ratings with $626 average price target despite trimming targets due to software sector valuation shifts
• Options market prices in a 5.41% swing following earnings as investors focus on AI and cloud performance

Microsoft reports fiscal 2026 second quarter results after the bell on January 28. Analysts project earnings of $3.91 per share and revenue of $80.28 billion.

Microsoft Corporation, MSFT

The earnings per share estimate represents a 21% year-over-year increase. Revenue is forecast to grow 15% from the same period last year.

The company has beaten earnings expectations in nine straight quarters. This track record keeps investor confidence high heading into the report.

Shares are up 7% in 2025 but remain 14% below their all-time high. The pullback started after the October earnings announcement.

Cloud Business Drives Growth Expectations

Azure cloud revenue jumped 40% year-over-year in the first quarter. The platform has become a go-to choice for companies building AI applications.

Microsoft offers access to multiple generative AI models through Azure. Users can tap into OpenAI’s ChatGPT, X’s Grok, Meta’s Llama, and Anthropic’s Claude.

This multi-model strategy differentiates Azure from competitors. It gives developers flexibility in choosing the right AI tools for their needs.

New data centers in Atlanta and Wisconsin support the expansion. These facilities should help maintain strong growth momentum in the cloud segment.

The Copilot AI assistant within Office products has gained adoption. But Azure remains the primary focus for investors evaluating Microsoft’s AI strategy.

Valuation Provides Entry Point

The stock now trades at 28.5 times forward earnings. This sits below the five-year average of 31.5 times forward earnings.

Several analysts recently lowered price targets while keeping Buy ratings. UBS cut its target to $600 from $650.

Cantor Fitzgerald, Wells Fargo, and Mizuho Securities also trimmed targets. All cited broader software sector valuation pressures rather than Microsoft-specific concerns.

Before October, Microsoft traded above 32 times forward earnings. The current multiple offers a more reasonable entry point for investors.

Wall Street maintains a Strong Buy consensus with 32 Buy ratings and two Holds. The average price target of $626.14 implies 34.38% upside potential.

Options traders expect a 5.41% move in either direction after earnings. This reflects uncertainty about how the market will react to cloud and AI metrics.

Karl Kierstead of UBS noted that Azure growth looks strong based on new infrastructure investments. His price target cut reflected sector-wide valuation adjustments, not fundamental weakness at Microsoft.

The company operates diverse business units beyond cloud computing. These include Office software, Xbox gaming, LinkedIn, and various hardware products.

Investor attention centers on Azure performance and AI monetization progress. These metrics will determine whether the stock breaks out of its recent trading range.

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