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Microsoft hit a $4 trillion market capitalization for the first time on Tuesday, joining Nvidia in that exclusive group. Investors now await the company’s fiscal first-quarter report after markets close Wednesday, particularly its Azure outlook. Wall Street is still bullish after the stock’s big rally this year, thinks shares could rise further.
FactSet’s consensus calls for $75.4 billion in revenue and $3.67 in adjusted EPS for the quarter, while analysts forecast $80.1 billion in revenue and $3.80 in EPS for the current quarter.
Microsoft and OpenAI revealed yesterday that the AI startup will turn its for-profit arm into a public-benefit corporation, with Microsoft taking a 27% stake. They also said OpenAI will buy an additional $250 billion worth of Azure services from Microsoft over time.
Key Highlights
- MSFT’s Azure is taking market share from Amazon Web Services: in the latest quarter Azure revenue rose 39% year‑over‑year, compared with 18% growth at AWS.
- Management now aims to make AI the primary growth driver and has heavily invested in data centers, spending roughly $80 billion on AI-enabled infrastructure in FY2025. That level of investment and the timetable for returns will remain focal points into FY2026.
- The company stands at a crossroads: it is investing billions (even hundreds of billions) annually in AI but has not yet seen meaningful returns. The long-term plan is to build out data centers now and turn that investment into durable, high-margin software, and cloud revenue down the line. Whether that payoff occurs in 2026 and 2027 will be pivotal for Microsoft’s future performance.
- Investors will watch Microsoft’s infrastructure spending closely this week. Its cloud and AI data‑center investments have driven huge sales gains at Nvidia. Earnings from Microsoft, Alphabet, Amazon and Meta will shed light on demand for Nvidia and other AI infrastructure suppliers.
Analysts Expectation
- UBS reiterated a Buy on Microsoft with a $650 price target. They said the updated Microsoft–OpenAI deal, arriving sooner than expected, is positive: the $250B Azure commitment boosts visibility on long‑term cloud growth, and Microsoft’s IP/model hosting rights are strong despite retaining the AGI clause. For OpenAI, the recap opens financing options and secures Microsoft as a major compute partner, supporting its revenue scaling.
- Mizuho reaffirmed an Outperform on Microsoft with a $640 price target. They said the updated Microsoft–OpenAI deal reinforces a healthy, mutually beneficial partnership. Microsoft keeps its revenue share, exclusive IP rights and Azure API exclusivity until AGI, gains 27% equity, and gave up its right of first refusal. Mizuho remains bullish on Microsoft’s medium‑term revenue opportunities and AI monetization.
- Wolfe Research reiterated an Outperform on Microsoft with a $675 price target. They called the new Microsoft–OpenAI deal an “open marriage”: the $250B Azure commitment is a firm multiyear spend that boosts visibility into Azure growth and cements Microsoft as the default inference platform. Microsoft can now build and release its own frontier models, creating an independent path for model development and long‑term margin upside. An independent AGI expert panel prevents OpenAI from unilaterally declaring AGI, protecting Microsoft’s IP, revenue share, and model access. The structure reduces regulatory risk by allowing OpenAI partner diversification while preserving Microsoft’s exclusivity through 2032. Wolfe sees upside to their Azure AI revenue forecasts and reiterates Outperform.
- Goldman Sachs reiterated a Buy on Microsoft with a $630 price target. They said the amended OpenAI agreement is significant: OpenAI will buy $250B of incremental Azure services; Microsoft loses ROFR as OpenAI’s compute provider but gains extended IP rights through 2032 (including post‑AGI models); OpenAI’s recapitalization gives Microsoft a roughly 27% stake in the foundation (32.5% in the for‑profit PBC) representing a $135B investment. Goldman views the deal as validating Azure’s role for AI workloads, protecting long‑term IP value, and reinforcing Microsoft’s leadership across AI infrastructure, platform, and applications.
MSFT Q1 2026 earnings after-market (4:05 pm ET) Wednesday October 29, 2025
Option Statistics
Put/Call ratio suggests the following three scenarios:
- The put/call ratio ranges from 2.7774 to 0.4785 across the next four expiries, signaling option traders are long Calls in the first two and the fourth weeks.
- While heavy on Puts in the third week.
- Weak earnings or guidance could spark a sharp sell‑off.
- Stronger‑than‑expected results and guidance would likely produce a sharp rally.
- Options flow shows large net positive gamma at the 550 strike and a smaller net negative gamma at the 475 strike for the Oct‑2025 to Jan- 2028 expiries.
Technical Analysis Perspective
- MSFT has been trading within a rising channel since the April 2025 low of 344.80.
- Prices rejected the 555 level in late July 2025 and have so far failed to break above it this week, which is the middle line of the channel.
- A dip to the lower end of the channel, around 520–510, is likely post-earnings.
- Bull case: MSFT breaks above 555–556 to target 590–595.
Weekly Candlestick Chart
MSFT Seasonality Chart:
Since 2006, MSFT has seen October close with a 4.6% gain in 70% of years and November with a 2.0% gain in 68% of years.
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