To The Moon

$Microsoft(MSFT)$ is scheduled to release its fiscal Q4 2025 earnings after market close on Wednesday, July 30, 2025. This report will provide insights into the company's performance for the quarter ending June 30, 2025, and its outlook for fiscal year 2026.

Overall Revenue and EPS:

Consensus revenue estimate is around $73.7-$73.8 billion, representing approximately 13-14% year-over-year growth.

Consensus EPS estimate is around $3.35, a 10-16% year-over-year increase.

Microsoft (MSFT) reported its fiscal Q3 2025 earnings on April 30, 2025, delivering strong results that largely surpassed analyst expectations.

Fiscal Q3 2025 Earnings Summary:

Strong Financial Performance:

Revenue: $70.1 billion, up 13% year-over-year (15% in constant currency), beating consensus estimates.

Operating Income: $32.0 billion, up 16% (19% in constant currency).

Net Income: $25.8 billion, up 18% (19% in constant currency).

Diluted EPS: $3.46, up 18% (19% in constant currency), exceeding expectations.

Cloud and AI as Growth Drivers:

Microsoft Cloud Revenue: Reached $42.4 billion, up 20% (22% in constant currency), demonstrating sustained demand.

Intelligent Cloud Segment: Revenue was $26.8 billion, up 21% (22% in constant currency).

Azure and other cloud services: Revenue grew by a robust 33% (35% in constant currency), with AI services contributing 16 percentage points to this growth. This was a key highlight, showing significant AI monetization.

Microsoft expanded its data center capacities globally, opening facilities in ten countries.

Commercial bookings grew 18% (17% in constant currency), driven in part by an Azure commitment from OpenAI.

Productivity and Business Processes: Revenue was $29.9 billion, up 10% (13% in constant currency), driven by Microsoft 365 Commercial and Dynamics 365. Microsoft 365 Copilot saw strong adoption, with hundreds of thousands of customers using it.

More Personal Computing: Revenue was $13.4 billion, up 6% (7% in constant currency). This segment saw growth in Search & News advertising and Xbox content & services, while Windows OEM and Devices had more modest increases.

Capital Expenditures (Capex): Reached $21.4 billion, reflecting continued significant investment in AI infrastructure to meet growing demand.

Guidance for Fiscal Q4 2025 and Lessons Learned:

Following the Q3 beat, Microsoft provided guidance for fiscal Q4 2025. The guidance was generally strong and in line with or slightly above analyst expectations, particularly for Azure growth.

Q4 2025 Outlook Highlights:

Azure constant currency growth was projected to be between 34-35%.

Microsoft Cloud gross margin percentage was expected to see a slight decrease year-over-year due to the impact of scaling AI infrastructure, indicating that heavy investments were ongoing.

Capex was expected to continue to grow, but at a slower rate than in fiscal 2025.

Lessons Learned from the Guidance:

AI is Driving Tangible Results and Investment: The significant contribution of AI services to Azure's growth (16 percentage points) was a clear signal that Microsoft's AI investments are directly translating into revenue. This confirmed that AI is not just hype but a real monetization opportunity.

Investment for Growth is Prioritized over Short-Term Margins: The slight anticipated compression in Microsoft Cloud's gross margin, due to scaling AI infrastructure and increasing capex, demonstrated Microsoft's willingness to invest heavily upfront to capture the burgeoning AI market. The lesson is that for market leaders in rapidly evolving fields like AI, maintaining dominance and future growth sometimes means sacrificing a bit of immediate margin expansion. Investors were generally comfortable with this trade-off, understanding it as a necessary step for long-term gains.

Consistency Builds Confidence: Despite the massive scale, Microsoft continued to show consistent, double-digit growth across its key cloud segments. This consistent performance, coupled with a clear narrative around AI leadership, reinforced investor confidence and supported the stock's premium valuation.

"Beats and Raises" are Powerful: Microsoft not only beat Q3 estimates but also provided Q4 guidance that generally met or slightly exceeded expectations, particularly for Azure. This "beat and raise" pattern is highly favored by the market and typically leads to positive stock performance. Indeed, Microsoft's stock surged by as much as 7% in after-hours trading following the Q3 earnings release, reflecting strong investor approval of both the current performance and the future outlook.

In essence, the key lesson from Microsoft's Q3 2025 earnings and guidance was that aggressive, well-executed investment in AI infrastructure and services, even if it impacts short-term margins, is a winning strategy that directly translates into robust cloud growth and strong investor confidence.

Key Metrics Investors Should Watch:

Intelligent Cloud Revenue (especially Azure growth): This is Microsoft's primary growth engine.

Analysts expect Intelligent Cloud revenue to reach around $28.94 billion, representing approximately 21.5% year-over-year growth.

Azure revenue growth (in constant currency) will be the most crucial metric. Microsoft previously guided for 34-35% constant currency growth for Azure in Q4 2025. Any deviation from this, particularly due to AI workload demand, capacity constraints, or pricing, will heavily influence the stock. AI services contributing significantly to Azure's growth will be a key focus.

Commentary on AI infrastructure investments (capex) and their impact on profitability will be closely watched.

Productivity and Business Processes Revenue: This segment includes Office 365, LinkedIn, and Dynamics.

Analysts project revenue around $32.15 billion, reflecting strong year-over-year growth (some estimates as high as 58.2% YoY, likely due to a challenging comp or a new revenue reporting classification for this segment).

Focus on Microsoft 365 Commercial Cloud growth (previously guided around 14% in constant currency) and the adoption of Microsoft 365 Copilot. Increased average revenue per user (ARPU) from E5 upgrades and Copilot adoption are key drivers.

LinkedIn's performance will also be monitored, though it tends to be more stable.

More Personal Computing Revenue: This includes Windows, Devices, Gaming (Xbox), and Search & News Advertising.

This segment is expected to be more moderate, with revenue projected around $12.60 billion. Some estimates even show a slight year-over-year decline.

Windows OEM revenue is expected to decline mid-to-high single digits.

Gaming revenue (Xbox content and services) is expected to show mid-to-high single-digit growth.

Search and news advertising is anticipated to show high-teens growth.

Any impact from new Copilot+ PCs and Windows features will be of interest.

Microsoft has a strong track record of beating EPS estimates (beating in the last four quarters with an average surprise of 5.21%).

Forward Guidance (Q1 2026 and Full-Year 2026): This will be the most critical factor. Investors will look for insights into the sustained demand for AI, cloud services, and any potential impacts from global economic conditions or competition. Clarity on capex plans for future AI infrastructure build-out is also important.

Microsoft (MSFT) Price Target

Based on 50 analysts from Tiger Brokers offering 12 month price targets for Microsoft in the last 3 months. The average price target is $542.65 with a high forecast of $650.00 and a low forecast of $423.00. The average price target represents a 5.88% change from the last price of $512.50.

Opportunities for Short-Term Trading Post-Earnings:

Microsoft stock has recently hit new highs, gaining significantly over the past three months. It is currently trading at a premium valuation (e.g., P/E ratio of ~39x vs. S&P 500's ~27x). This premium valuation means that market expectations are very high, and even a slight miss or cautious guidance could lead to a pull-back.

Positive Scenario (Strong Beat & Bullish Guidance): If Microsoft significantly beats on all key metrics, especially Azure growth and Copilot adoption, and provides very strong guidance for Q1 2026 and potentially the full fiscal year 2026, the stock could see further upside. This would likely be driven by renewed investor confidence in the long-term AI monetization story.

Negative Scenario (Miss or Cautious Guidance): Given its high valuation, a miss on revenue or EPS, or, more critically, soft or conservative guidance, could trigger a sharp sell-off. Concerns about AI capacity constraints, slower-than-expected AI monetization, or broader macroeconomic headwinds could lead to profit-taking. Any signs of deceleration in Azure's constant currency growth rate would be particularly impactful.

"Sell the News" Risk: Even if Microsoft meets expectations, there's always a risk of a "sell the news" reaction, where investors who bought in anticipation of strong results might take profits.

Implied Volatility: Options markets will likely price in significant volatility around the earnings release. This means buying options for a directional bet might be expensive. Spreads or strategies that profit from a decrease in implied volatility after the event (if the stock doesn't move dramatically) could be considered.

Technical Levels: Watch for key support and resistance levels. A clean break above resistance on positive news or below support on negative news could signal short-term momentum.

Technical Analysis - Exponential Moving Average (EMA)

MSFT have a nice upside movement for quite some time, but there is not much strength on the positive momentum, so this could be due to investors waiting to see how MSFT AI and Cloud growth have been doing since the last quarter reported.

Though the bulls are in control, and they are building a daily uptrend continuation, but I think we need to see a strong result or even an earnings beat, with strong positive guidance from MSFT to see a price surge or break out post earnings.

I do not hold any MSFT shares as I think they need to focus on some of the segments and be more focused, else they might be out of the AI race if ChatGPT trend diminish.

Summary

Microsoft's Q4 2025 earnings will be dominated by the narrative around AI and cloud growth, particularly Azure. While the company has a history of beating estimates, its premium valuation means investors are looking for perfection and strong forward guidance.

Traders should be prepared for potential volatility and closely analyze the commentary on AI adoption, cloud margins, and future outlook.

Microsoft (MSFT) reports fiscal Q4 2025 earnings on July 30, 2025. Analysts anticipate robust growth, particularly in the Intelligent Cloud segment, driven by Azure's AI-fueled expansion (34-35% cc growth) and strong Copilot adoption.

Overall revenue is projected around $73.8 billion, with EPS at $3.35. Given MSFT's premium valuation and recent stock highs, investors will scrutinize forward guidance for FY26. Any softness or stronger-than-expected AI monetization will significantly influence post-earnings short-term trading.

Appreciate if you could share your thoughts in the comment section whether you think MSFT could provide an earnings beat and alsp stronger guidance for its AI and Cloud segment.

@TigerStars @Daily_Discussion @Tiger_Earnings @TigerWire appreciate if you could feature this article so that fellow tiger would benefit from my investing and trading thoughts.

Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.