Microsoft will report fiscal first-quarter 2027 results on October 28, 2026 after hours. Based on the most recent compiled expectations, Microsoft Corporation’s current quarter is projected to deliver revenue of $90.69 billion, up 20.39% year over year, EBIT of $43.99 billion, up 25.18% year over year, and adjusted EPS of $4.72, up 28.80% year over year.
Source: Tiger Trade App
What to Watch in the FY27 Q1 Report
The Key Swing Factor: Azure
Azure is where the market will focus. Microsoft is changing its segment reporting starting FY2027, collapsing three segments to two and — critically — disclosing Azure revenue as a standalone line for the first time. Azure revenue hit $29.4B in the June quarter (+42% YoY), and FY2026 Azure revenue was $101.9B, roughly 30% of total revenue. This makes Azure directly comparable to AWS and Google Cloud and raises the scrutiny on the number.
Microsoft's Azure cloud and Microsoft 365 businesses are positioned to meet rising investor expectations ahead of the company's upcoming earnings report, with enterprise demand and AI adoption supporting growth, UBS Securities said in a note.
The investment firm said in a note on Oct 14 that it expects Azure to grow 46% in the September quarter, slightly below the 47% growth investors are looking for. However, continued enterprise demand and expanding AI capacity could support further growth in the following quarter.
UBS said investor expectations for Azure and Microsoft 365 have increased following the stock's rally, but fundamentals support the higher outlook.
It cited solid enterprise demand, AI infrastructure expansion, usage-based pricing for Copilot and increased adoption of Microsoft's AI security suite as potential growth drivers.
UBS also said the stock's valuation remains reasonable given the potential for AI monetization, despite higher growth expectations.
A meaningful share of Azure's growth, however, is concentrated in a small number of AI customers. Stifel estimated roughly half of Azure's FY2026 revenue growth came from OpenAI , with Anthropic also increasingly dependent on Microsoft's cloud.Xueqiu That concentration is a double-edged sword: it powers the headline growth, but it also means Azure's trajectory is unusually sensitive to the spending decisions of a handful of counterparties.
AI Investments to Weigh on Gross Margins
While Azure and Microsoft 365 continue to deliver solid growth, rising investment in AI infrastructure is expected to put pressure on Microsoft’s margins.
Morgan Stanley expects Microsoft’s cloud gross margin to decline to 65.8% in fiscal 2027 from 67.9% in fiscal 2026, a drop of 2.1 percentage points.
The decline is primarily driven by higher depreciation and operating costs as Microsoft continues to invest in AI servers, data centers and related infrastructure.
However, Morgan Stanley believes the company can partly offset the pressure through tighter operating expense controls and efficiency gains from deploying AI tools internally.
The bank expects Microsoft’s operating expenses to grow at a mid- to high-single-digit rate. The company has also deployed AI tools across internal functions, including customer service, generating hundreds of millions of dollars in cost savings.
Microsoft is also improving infrastructure efficiency. By streamlining its data center deployment processes, the company has cut the time required to bring facilities online by more than 50%.
In addition, Microsoft plans to begin deploying its in-house Maia 300 AI accelerator at scale in 2027. The chip is expected to improve AI inference efficiency, reduce reliance on third-party GPUs and help lower computing costs over the longer term.
Morgan Stanley expects AI infrastructure spending to remain a near-term drag on gross margins, but believes operational efficiency gains and the rollout of in-house chips could help keep Microsoft’s overall operating margin broadly stable.
Quarterly CapEx Seen Exceeding $50 Billion
Microsoft’s continued expansion of AI infrastructure is expected to keep capital expenditure elevated over the coming quarters.
According to Morgan Stanley’s estimates, Microsoft’s capital expenditure guidance for the first quarter of fiscal 2027 exceeds $50 billion, with spending primarily directed toward data center construction and AI computing capacity.
Despite the scale of investment, Morgan Stanley expects Microsoft to maintain positive free cash flow in fiscal 2027.
To preserve financial flexibility, however, Microsoft may increasingly turn to debt financing to fund AI infrastructure projects with attractive expected returns.
Morgan Stanley’s model suggests Microsoft could issue a combined $45 billion in debt during fiscal 2028 and fiscal 2029, while moderately reducing share repurchases to retain more cash for AI infrastructure investment.
For investors, the scale of Microsoft’s capital spending is no longer the only issue. The key questions are how quickly incremental computing capacity translates into Azure revenue, whether AI businesses can generate sufficient returns, and whether free cash flow can continue to grow. These factors are likely to play an increasingly important role in determining the company’s valuation.
Analysts' Opinions
Guggenheim Reiterates Buy on Microsoft Stock Ahead of Earnings
Guggenheim reiterated a Buy rating and $586.00 price target on Microsoft ahead of the company’s fiscal first-quarter 2027 earnings report.
The firm outlined expectations for three key business segments. Azure appears positioned for solid results and guidance, while M365 Commercial Cloud shows limited upside potential for reported results with some risk to guidance. Windows OEM & Devices faces risk to both reported results and guidance.
As one of the earlier hyperscalers to report earnings, Microsoft will be closely watched for capital expenditure commentary as an indicator of overall artificial intelligence demand. The firm expects particular focus on capex guidance.
Bernstein Raised Microsoft's PT to $662 While Maintaining an 'Outperform' Rating
Bernstein raised its price target on Microsoft stock on Oct 19 ahead of the company's upcoming earnings report next week. Bernstein raised its price target to $662 from $660 while maintaining an 'Outperform' rating on the shares.
Bernstein also noted that while sentiment has improved since last quarter, "expectations going into the quarter generally still seem reasonable." The firm added that it "leans with a positive view into the Street's reaction to the results."
StoneX Raises Microsoft Stock Price Target to $600 on AI Progress
StoneX raised its price target on Microsoft stock to $600 from $450 on Oct 16 while maintaining a Buy rating on the shares. The firm cited Microsoft’s efforts to control and optimize more layers of the AI economic stack as a key development since the June quarter.
StoneX said the immediate stock reaction will likely depend on whether Azure meets expectations. The firm described the bar for Azure as highly reasonable.
StoneX said fiscal 2026 proved Microsoft can build AI infrastructure at extraordinary scale, while fiscal 2027 increasingly becomes about converting that scale into greater AI yield, measured by useful intelligence, revenue and profit per dollar and watt deployed. The strategy appears to be working, with Microsoft generating $331.84 billion in revenue over the last twelve months, representing 18% growth.
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