Key Points
-
Investors want to see if massive spending plans are translating into profits.
-
Microsoft has a backlog for its cloud platform Azure, currently restrained by capacity.
-
The company’s earnings will show how the transition from infrastructure to application is going for large tech companies.
- 10 stocks we like better than Microsoft ›
Microsoft‘s (NASDAQ: MSFT) stock has been on a roller-coaster ride to begin 2026. From the beginning of the year until March 27, Microsoft lost nearly a quarter of its value, but since then, it has surged nearly 21%. Still, it’s down more than 8% year to date (as of April 22).
Much of Microsoft’s struggles stemmed from investors’ concerns about two things: its massive spending plans and a potential slowdown in the growth of its cloud platform, Azure.
Will AI create the world’s first trillionaire? Our team just released a report on the one little-known company, called an “Indispensable Monopoly” providing the critical technology Nvidia and Intel both need. Continue »
When Microsoft announces its fiscal year third-quarter (FY Q3) earnings on April 29, it has a chance to be the most important tech event of the year. Not only will it allow Microsoft to shift the narrative, but it will be a peek into the broader artificial intelligence (AI) ecosystem.
Image source: The Motley Fool.
What investors are looking for during Microsoft’s earnings
One of the first things investors will want to see is if Microsoft’s AI spending spree (it spent $37.5 billion in its FY Q2) has translated into worthwhile revenue. Making money has never been an issue for Microsoft — it made $81.3 billion last quarter, up 17% year over year (YoY) — but there are concerns about spending growth outpacing profit growth.
The next time to keep an eye on will be Azure’s growth. In the previous quarter, Azure revenue grew 39% YoY, but its growth was restricted by its $80 billion backlog. (Microsoft’s total backlog is $625 billion.) It can’t realistically offload that backlog in a quarter, but comparing Azure’s growth to changes in its backlog can provide insight into how much supply limitations are potentially hurting growth.
Lastly, investors will want to see how much Microsoft plans to spend in the upcoming quarter(s). I don’t think there’s a magic number that’s “too much,” because it will likely depend on how current spending has translated into revenue. If it’s translating well, I’m sure investors will be more lenient.
How Microsoft gives an inside look into the AI ecosystem
Microsoft has its hands in three key phases of the AI pipeline: infrastructure, cloud computing, and software applications.
From an infrastructure perspective, Microsoft’s current and future spending will impact Nvidia expectations because Microsoft is its largest customer. If Microsoft maintains its ambitious spending plans, it suggests AI chip demand remains high. However, a retraction in spending plans could signal that the build-out phase has plateaued.
It seems the market is at the point where it cares more about how AI is making money versus what AI can do. Playing a key part in both the infrastructure phase (where AI has been over the past couple of years) and the application phase (what’s happening now as companies try to monetize it) at its scale puts Microsoft under a microscope.
If Microsoft is showing the transition is happening profitably, it’s an essential “proof of concept” for a whole sector. That’s why these earnings are so important for tech as a whole.
Should you buy stock in Microsoft right now?
Before you buy stock in Microsoft, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Microsoft wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $502,837!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,241,433!*
Now, it’s worth noting Stock Advisor’s total average return is 977% — a market-crushing outperformance compared to 200% for the S&P 500. Don’t miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
*Stock Advisor returns as of April 23, 2026.
Stefon Walters has positions in Microsoft. The Motley Fool has positions in and recommends Microsoft and Nvidia. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
