Microsoft Corporation (MSFT) is poised to announce its fiscal Q2 2026 earnings on Wednesday, with Wall Street analysts predicting earnings per share (EPS) of $3.91 alongside revenue expectations of $80.3 billion. This follows the company”s impressive performance from the previous year, where it reported EPS of $3.23 on $69.6 billion in revenue.
The focus will undoubtedly be on the growth of Azure, which is anticipated to see an increase of 38.4%. This marks a slight decline from the 40% growth observed in the previous quarter. However, some analysts, including Stifel”s Brad Reback, suggest that Azure growth could potentially exceed these estimates, citing strong economic conditions and the rising utilization of OpenAI services as supporting factors.
Microsoft has consistently exceeded earnings expectations for nine consecutive quarters, and its stock has gained 7.5% over the past year, despite trading 14% below its all-time high reached in October. As of Tuesday, shares closed at $480.58.
Investors will also be keenly interested in the company”s capital expenditures, which reached $34.9 billion in the first fiscal quarter. This figure surpassed expectations, and the company has indicated plans for accelerated spending in fiscal 2026. Such commitments signal confidence in the ongoing demand for AI infrastructure and services.
However, rising memory costs could pose challenges. As demand for AI components continues to outstrip supply, analysts like Raymond James” Andrew Marok express concerns that these constraints might temper the outlook for Azure”s growth. Despite this, Marok maintains an Outperform rating with a target price of $600.
Valuation remains a topic of discussion as well, with Microsoft trading at 28.5 times forward earnings, which is below its five-year average of 31.5 times. While some analysts have recently adjusted their price targets downward due to broader valuation pressures in the software sector, they have retained their Buy-equivalent ratings. The average price target among analysts currently stands at $626.14, suggesting a potential upside of 34% from its current trading levels.
As Microsoft prepares to launch its Maia 200 accelerator, a new in-house processing chip, it continues to strengthen its position in the competitive AI landscape. The upcoming earnings report will provide critical insights into the company”s ongoing strategies and market performance as it navigates the rapidly evolving technology sector.
