Microsoft Earnings Report: AI Impact and Azure Growth

Key Points:

* Microsoft (MSFT) reports Q2 earnings after the bell on Wednesday.
* Wall Street assesses the impact of DeepSeek's AI model development on tech giants.
* Microsoft's cloud revenue is projected to increase, driven by Azure and Commercial Cloud segments.
* Azure growth is anticipated to accelerate in the second half of 2025.
* Despite AI expansion, Microsoft's stock performance has lagged behind competitors.
* Analysts predict a potential "mini revenge trade" as AI sales and Copilot adoption rise.
* Microsoft aims to boost PC sales with AI-powered Copilot+ PCs, targeting native AI application execution.

Earnings Expectations:

* Earnings per share (EPS) of $3.13 on revenue of $68.8 billion (Bloomberg consensus)
* EPS of $2.93 on revenue of $62 billion in Q2 2022
* Commercial Cloud segment revenue projected at $41.1 billion, up from $31.9 billion
* Intelligent cloud business, including Azure, estimated at $25.8 billion, up from $21.5 billion

Azure Growth:

* Jefferies analyst Brent Thill anticipates Azure growth reacceleration in the second half of 2025.
* Improved cloud consumption trends and OpenAI's Azure commitment support this outlook.

Stock Performance:

* Microsoft's stock has underperformed competitors due to muted AI sales.
* Evercore ISI analyst Kirk Materne sees a potential "mini revenge trade" as AI and Copilot adoption increases.

AI Impact and Copilot+ PCs:

* Microsoft's AI investments face challenges from DeepSeek's less expensive model development.
* Copilot+ PCs aim to stimulate PC sales by offering native AI application execution.
* Intriguing AI use cases and hardware advancements remain crucial drivers for consumer PC upgrades.