Microsoft Earnings Preview: DeepSeek Disruption and AI Investments in Focus
Earnings Release: Wednesday, April 26, after market close
Key Metrics:
* EPS: $3.13 (consensus estimate)
* Revenue: $68.8 billion (consensus estimate)
* Commercial Cloud Segment Revenue: $41.1 billion (estimate)
* Intelligent Cloud Revenue (Azure): $25.8 billion (estimate)
AI Disruption and Microsoft's Response:
Microsoft's earnings report comes amid the industry's response to China's DeepSeek, an AI model that has challenged the need for the most expensive chips for AI training. Microsoft is heavily investing in data centers and infrastructure for its AI services and must now prove the effectiveness of its investments.
Azure Growth and Copilot+ Ambitions:
Analysts expect Azure growth to accelerate in the second half of 2025. Microsoft is also exploring AI-native PC applications with Copilot+, aiming to drive PC sales. However, the value proposition of these applications in the consumer market remains to be seen.
Financial Outlook:
Microsoft's stock price has underperformed competitors over the past year. Analysts believe it could stage a recovery if AI sales, Copilot+ adoption, and capital expenditure moderation boost free cash flow.
Market Reaction:
Wall Street will be closely watching Microsoft's earnings report to assess the impact of AI disruption, the effectiveness of its Azure investments, and its Copilot+ strategy. The report could influence stock prices and broader industry sentiment.