Live: Microsoft (MSFT) Announces Earnings Tonight – Will Shares Soar?

Microsoft‘s (Nasdaq: MSFT) conference call is over.

Shares had nearly trimmed their losses during the call. Shortly before 6 p.m., they hit $535 per share, which is only slightly below Microsoft’s closing price of $541.55 in today’s trading.

Yet, the moment Microsoft issued guidance shares plunged. In after-hours trading, Microsoft is now trading for about $520 per share, or down 4%.

We listened to Microsoft’s hour-long conference call and drilled down the three most important storylines investors need to know:

OpenAI’s Losses Having a Bigger Picture on Microsoft’s Bottom Line

Microsoft disclosed that the company took a $3.1 billion loss to net income that is the result of its investment in OpenAI. That loss trimmed EPS by $.41 in the quarter. OpenAI is now material enough to Microsoft’s results that CFO Amy Hood announced that moving forward outlook will exclude the impacts of Microsoft’s investment in OpenAI.

Guidance Leads to Shares Sinking

Microsoft waits for its earnings calls to announce guidance. As we noted earlier, shares sank right after the company issued guidance for next quarter. Here’s the main quote:

“Starting with the total company, we expect revenue of USD 79.5 billion to USD 80.6 billion or growth of 14% to 16%. We expect COGS of USD 26.35 billion to USD 26.55 billion or growth of 21% to 22%. And operating expense of USD 17.3 billion to USD 17.4 billion, growth of 7% to 8%. Operating margins should be relatively flat year-over-year and down sequentially, aligned with historic seasonality.”

Why did shares drop after guidance? Well, the midpoint of Microsoft’s revenue guidance is essentially inline with Wall Street’s expectations that Microsoft will deliver $80.095 billion in revenue next year. With shares trading for about 35X next year’s estimated profits, merely matching expectations is a disappointing result.

Microsoft Expects Azure to Be Supply Constrained Through the End of Fiscal 2026

Here’s what Amy Hood had to say about Azure:

“For Intelligent Cloud, we expect revenue of USD 32.25 billion to USD 32.55 billion or growth of 26% to 27%. In Azure, we expect Q2 revenue growth of approximately 37% in constant currency as demand remains significantly ahead of the capacity we have available. And while we’re accelerating the amount of capacity we’re bringing online, we will continue to balance Azure revenue growth with the growing needs across our first-party apps and AI solutions, our own R&D efforts and the end-of-life server replacements. Therefore, we now expect to be capacity constrained through at least the end of our fiscal year.”

The goal posts keep moving on how long demand will exceed supply in the AI space. While the increased spending hurts the bottom line of companies like Microsoft, Meta, and Alphabet, it’s great news for AI infrastructure companies.

Microsoft’s confernce call is starting now.

As a reminder, the company is expecte dto issue guidance at around 6 p.m. ET. That guidance could cause a relatively large shift in its after-hours pricing.

We’ve been saying it over and over again in this live blog, Microsoft’s earnings were very good. The company smashed last quarter’s EPS and beat revenue by a sound margin.

Azure also topped Wall Street’s expectations, growing at 40% (and 39% in constant currency), which was above consensus estimates of 37.5% growth.

So the big question is, why were shares of Microsoft down?

Right after earnings, shares of Microsoft ticked down by about 4%, and have been rising ever since. As of 4:48 p.m. ET, shares are down 1.4%.

That’s a strong rebound.

Could Microsoft open in the green tomorrow? Keep in mind the company will discuss guidance on its conference call, so there’s potential for a lot of movement in its share price once that begins in about 40 minutes.

Here are a few areas we were most impressed by when reviewing Microsoft’s earnings:

• Capital expenditures rose 74% from last year to $34.9 billion, which was above a forecast of $30 billion. While rising capital expenditures are a cost, they also point to continued rabid demand for Azure, which continues to gobble up market share from Amazon.
• Overall, Intelligent Cloud grew 28%, a very strong growth rate.
• Xbox continues to tread water, growing just 1% from last year, but that segment is also increasingly less important to Microsoft’s bottom line.

As a reminder, Microsoft’s conference call starts at 5:30 p.m. and we expect the company to issue guidance at around 6 p.m. ET. 

You can join the call by clicking here.

• Microsoft: Down 2.1%
• Alphabet: Up 5.7%
• Meta: Down 9%
• ServiceNow: Up 4.7%

That’s the question many investors are asking at the moment.

Last quarter was outstanding with revenue and earnings beats. Azure beat Wall Street’s estimates (the Street expected 37.5% growth).

Overall, its hard to poke any holes in the quarter.

Yet, shares of the company were up 29% headed into earnings, so this might be investors clearing some profits after Microsoft has rallied hard off its April lows.

Satya Nadella underscored that “Every quarter Microsoft delivers hundreds of products, services, and enhancements,” highlighting robust innovation across its cloud, productivity and business applications. He maintained a cautiously optimistic tone and said Microsoft will provide forward-looking guidance on its earnings call as it builds on strong momentum in Intelligent Cloud and Productivity.

Very bullish on the quarter, CEO Satya Nadella said, “Microsoft Copilot and Copilot stack are orchestrating a new era of AI transformation, driving better business outcomes across every role and industry.” He highlighted strong execution by sales teams and partners and noted that forward-looking guidance will be provided on the upcoming earnings call.

Azure grew 40% year-over-year, topping Wall Street’s expectations.

Shares are now down 2.9%.

MSFT | Microsoft Q1’26 Earnings Highlights:

• Adj. EPS: $4.13 [✅]; [UP] +23% YoY
• Revenue: $77.7B [➖]; [UP] +18% YoY
• Net Income: $27.7B [✅]; [UP] +12% YoY

Outlook:

• • Microsoft anticipates continued growth driven by strong demand for cloud and AI services.
  • Investment in AI and cloud infrastructure is expected to enhance service offerings and customer engagement.

Q1 Segment Performance:

• Productivity and Business Processes Revenue: $33.0B  [➖]; [UP] +17% YoY
• Intelligent Cloud Revenue: $30.9B  [➖]; [UP] +28% YoY
• More Personal Computing Revenue: $13.8B  [➖]; [UP] +4% YoY

Other Key Q1 Metrics:

• Adj. Operating Income: $38.0B  [➖]; [UP] +24% YoY
• Adj. Operating Expenses: $X.XB [➖]; [UP/DOWN] +/-X% YoY
• R&D Expenses: $8.1B  [➖]; [UP] +8% YoY
• Dividends Returned to Shareholders: $10.7B

CEO Commentary:

• Satya Nadella: “Our planet-scale cloud and AI factory, together with Copilots across high value domains, is driving broad diffusion and real-world impact. It’s why we continue to increase our investments in AI across both capital and talent to meet the massive opportunity ahead.”

CFO Commentary:

• Amy Hood: “We delivered a strong start to the fiscal year, exceeding expectations across revenue, operating income, and earnings per share. Continued strength in the Microsoft Cloud reflects the growing customer demand for our differentiated platform.”

Shares are gaining after initially dropping four percent, we’ll post a full earnings summary momentarily.

Microsoft earnings are out and the market is initially disappointed – shars are down 4% immediately.

More analysis to come… 

Here we go, it’s almost time for Microsoft’s earnings.

As a reminder, simply leave this page open, and new updates will begin posting as soon as earnings hit the newswires. We expect the stock to begin moving slightly after 4:05 pm. ET. 

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The most important way to get value out of this blog is to simply leave it open, as new updates will appear automatically (and you can find our previous updates below).

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We’re now just 30 minutes from Microsoft’s Fiscal Q1 earnings. Late in the trading day, Microsoft shares are down .62%.

It’s been a strong day for AI stocks in general with NVIDIA (Nasdaq: NVDA) gaining nearly 3%. Yet, while many semiconductor and infrastructure stocks are seeing strong gains, Microsoft shares are down.

A few notable companies that reported yesterday in the AI space include:

• Bloom Energy: Up 18% after strongly beating earnings and increasing capacity to support revenue growth of up to 4X by the end of 2026.
• Caterpillar: Up 11% thanks to incremental AI spending that’s causing massive growth in divisions like its generators.
• Teradyne: Up 22% after issuing extremely strong guidance. The company is seeing growth from Amazon’s robotic buildout and its test machinery seeing strong growth from AI customers.

Prediction market Polymarket currently puts the odds of Microsoft beating earnings tonight (listed at GAAP earnings of $3.66) at 91%.

The last time Microsoft didn’t beat earnings was July 2022, so we’d say the chances the company beats are at least 90%. Just remember, a beat alone won’t be enough to move shares up tomorrow.

The company will likely need to post EPS well above expectations (likely a 5 to 10% earnings suprise) and post commentary on future growth that is optimstic if shares are going to rise be green tomorrow and lead to a post-earnigns rally.