Microsoft Earnings Preview: Short-Term Costs Could Fuel Long-Term AI Domination

Microsoft (NASDAQ:MSFT) continues to demonstrate strong financial health and strategic prowess in the rapidly evolving technology landscape. With 14.13% revenue growth over the past twelve months and a solid 69.07% gross profit margin.

Its Azure cloud platform remains a key growth driver, recording a 35% year-over-year increase in constant currency, supported by significant partnerships with industry leaders like OpenAI. As Microsoft projects up to $45 billion in AI-driven revenue by 2026, fueled by innovations such as Microsoft 365 Copilot, the company positions itself at the forefront of the AI revolution.

However, challenges, including sales execution issues and a substantial $80 billion Capex plan, highlight the need for strategic focus as it navigates toward long-term dominance.

Key Highlights

• Investors will be eager to see sustained acceleration, especially after Google (NASDAQ:GOOGL) Cloud beat estimates with a 1.65% rise, as analysts project Azure revenue growth to reach 35%, up from 33% in Q3.
• Microsoft, one of the leading tech giants investing billions in AI infrastructure, noted during its most recent earnings call that its AI-related spending is anticipated to grow at a slower pace in fiscal year 2026 compared to 2025.
• The company’s extensive customer relationships and long-standing presence in enterprise software provide a solid foundation for driving adoption of its cloud and AI services. Its expertise in hybrid cloud solutions positions it well to meet the needs of enterprises implementing hybrid strategies. Additionally, its significant investments in security and compliance features make its cloud services particularly appealing to enterprise customers in regulated industries.
• Following Google’s report, Capex is expected to come back into focus, highlighting worries about the magnitude of investments and the limited progress in some AI projects.
• Rising competition from Amazon (NASDAQ:AMZN) Web Services and Google Cloud may threaten Microsoft’s ability to sustain its current growth rates in Azure. Additionally, some surveys suggest that demand for cloud services is leveling off, due to prior optimization efforts and customer dissatisfaction with costs, such as egress fees.

MSFT Q4 2025 earnings after-market Wednesday, July 30, 2025

Option Statistics

Put/Call ratio suggests the following three scenarios:

• With Put/Call ratio between 0.8525 to 0.6407 for the next four upcoming expiries suggests that the overall option traders are cautiously positioned.
• Lower earnings & guidance and higher capex could trigger a sharp sell-off as option traders would start selling their Calls.
• Better-than-expected guidance would trigger a gradual rally due to higher Call open interest in the August monthly option expiry.
• The option market is showing a large net positive Gamma at the 525 strike versus a small net negative gamma exposure at the 470 strike from July 2025 to December 2027.

Technical Analysis Perspective

• MSFT has surged in an uptrend since April 2025 Q3 earnings!
• Last month, prices broke through the July 2024 all-time high of 468.35.
• MSFT reached a new high of 518.29 last week.
• Prices are fluctuating within a rising channel, with support on dips around 505-508 from the beginning of this week.
• A decisive break below 505-508 support after earnings could signal a dip to retest the previous all-time high of 475–468.
• A strong move above 518.29 after earnings could open the door for a rally toward 530–536.

Weekly Candlestick Chart

MSFT Seasonality Chart

• MSFT closes 2.3% and 2.1% higher in July 65% and August 63% of the time since 2006.

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Ali Merchant is a seasoned financial market professional with expertise in Technical Analysis, Treasury & Capital Markets, Trading, Sales, Research, Training, Fund & Relationship Management, Fintech, and Digitalization. He is a CMT charter holder and an active member of CMT Association, USA, American Association of Professional Technical Analysts, and CMT Association of Canada. He has worked on various roles and organizations in North America and the GCC, such as ABN Amro bank, Thomson Reuters, Refinitiv, MAK Allen & Day Capital Partners (WA:CPAP), and Bridge Information Systems.

He is the founder of TwT Learnings, provides financial market training.

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