Is Microsoft (MSFT) a Good Stock to Buy before Earnings?
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It is worth noting that investors will be closely watching Microsoft's Intelligent Cloud segment, which is expected to generate $28.9 billion in revenue. This equates to a year-over-year increase of more than 22%. When breaking down the numbers further, its cloud platform Azure is projected to grow at about 34–35% in constant currency. This is slightly more than the 33% growth seen in the previous quarter, when AI services accounted for a large portion of the increase. Unsurprisingly, the Intelligent Cloud segment has been the firm's main growth driver over the past several years, as demonstrated in the image below.
Separately, Microsoft's Productivity and Business Processes segment is expected to rise by about 11–12% from last year to roughly $32 billion. Investors will also be paying attention to Microsoft's capital expenditure plans (capex) and profit margins. Interestingly, the company spent close to $80 billion on capex in Fiscal 2025 in order to expand its AI infrastructure, which includes custom chips and new data centers. However, management has previously said that it will slow down the pace of its capex growth in Fiscal 2026.
What Do Options Traders Anticipate?
Using TipRanks' Options tool, we can see what options traders are expecting from the stock immediately after its earnings report. The expected earnings move is determined by calculating the at-the-money straddle of the options closest to expiration after the earnings announcement. If this sounds complicated, don't worry, the Options tool does this for you. Indeed, it currently says that options traders are expecting a 4.1% move in either direction.
Is MSFT Stock a Buy?
Turning to Wall Street, analysts have a Strong Buy consensus rating on MSFT stock based on 30 Buys and three Holds assigned in the last three months. Furthermore, the average MSFT price target of $558.71 per share implies 9% upside potential. At the same time, TipRanks' AI analyst has an Outperform rating with a $558 price target.
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