When Microsoft Corp. (NASDAQ: MSFT) reports its fiscal third-quarter results after Thursday’s close, analysts are expecting the software giant to post earnings per share of $0.51 on revenues of $21.06 billion. In the same period last year, Microsoft’s EPS totaled $0.68 on revenues of $20.4 billion.

The company has been playing catch-up in the mobile sector, and it has struggled to keep up in the cloud business. All of that is having an effect on gross margins, and that may be the single most important data point we get out of Microsoft.

In the year-ago third quarter, the company’s gross profit came in at 36.7%, and it rose to 39.8% in the fiscal fourth quarter ended in June. In the first quarter of fiscal 2015, gross margin slipped a little to 39.15% before tumbling to 32.33% in the December quarter.

Net margin in the fiscal third quarter of last year was 27.74%, but if fell below 20% in each of the next two quarters before rising to 22.15% in the second quarter ended in December. Investors would like to see that number rise as well.

Gross margins are aligned with sales of Windows and the company’s commercial billings. Both were lower in the prior quarter, and without a growth spurt in the third quarter investors may begin to wonder if Microsoft can make the transition to a cloud-based company before the industry moves on to the next big thing.

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The coming release of the Windows 10 operating system may not provide the jolt to revenues and profits that we have come to expect with Microsoft. PC sales are weak though slightly better than expected, and that is what really drives Windows sales.

Analysts at Citigroup recently maintained a Sell rating on the stock, while Barclays held to its Overweight rating and Wells Fargo raised its view from Market Perform to Outperform. The consensus price target on the stock is $46.77, and at Wednesday’s closing price of $42.99, the potential gain on the shares is about 8.8%. Microsoft’s market cap is about $353 billion.

Shares traded up about 0.1% shortly before noon on Thursday, at $43.04 in a 52-week range of $38.51 to $50.05.

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