Microsoft's Q2 Earnings: Proving AI Value and Infrastructure Worth
Key Earnings Outlook:
* Revenue: Consensus estimates $68.8 billion
* EPS: $3.13
* Commercial Cloud: $41.1 billion
* Intelligent Cloud (Azure): $25.8 billion
Impact of DeepSeek and AI Investments:
Microsoft's AI investments face scrutiny following DeepSeek's release of an AI model trained on less expensive hardware. Microsoft aims to demonstrate the value of its AI efforts and justify its substantial infrastructure investments.
Slow Stock Performance:
Despite AI advancements, Microsoft's stock has underperformed competitors. Analysts expect potential gains driven by AI sales, Copilot adoption, and capital expenditure moderation.
Copilot+ PC Strategy:
Microsoft plans to boost PC sales with Copilot+ AI-native PCs. However, compelling use cases for these applications are yet to emerge.
Jefferies Analyst Outlook:
Jefferies analyst Brent Thill predicts Azure growth acceleration in 2H 2025, supported by improved cloud trends and OpenAI's expanded Azure commitment.
Key Metrics to Watch:
* Commercial Cloud revenue growth
* Azure platform performance
* Copilot adoption rate
* Free cash flow generation from capital expenditure moderation