Microsoft is scheduled to report earnings after the U.S. market closes on July 30.

Fueled by its strategic investment in OpenAI, Microsoft has been one of the biggest beneficiaries of the AI boom. The stock is up 20% year-to-date, significantly outperforming the broader U.S. market, and ranking second only to Nvidia among the “Magnificent Seven.”

Strong Financial Expectations

For its fiscal Q4 (calendar Q2 2025), the market expects Microsoft to report revenue of $73.805 billion, up 14.03% year-over-year, and earnings per share of $3.38, up 14.47%. The average analyst price target is $555.

Azure Cloud: Preferred AI Platform for Enterprises

Among Microsoft’s various business lines, Azure cloud remains the most closely watched. The market expects Azure to grow 35–36% year-over-year in Q4. For fiscal Q1 2026 (calendar Q3 2025), guidance suggests 34–35% growth.

Azure’s growth is powered by three key drivers:

Strong demand. In Q1, Azure AI servers processed over 100 trillion tokens—a fivefold increase year-over-year.

Improved AI infrastructure. Bottlenecks in AI server supply have eased. Microsoft shipped 6,000 GB200 NVL72 racks in Q2, up from 1,000 in Q1.

Enterprise adoption. Surveys show 52% of CIOs chose Azure to deploy application workloads, and Azure remains a top choice for enterprises over the next three years.

However, some analysts expect Azure’s revenue growth to decelerate after a near-term peak, due to declining backlog orders and lower pricing. Azure’s growth may normalize to around 30% in upcoming quarters.

Copilot and Office 365: Growing Penetration

Another major focus is Microsoft’s Copilot product suite and Office 365 subscription revenue.

As of Q1, GitHub Copilot surpassed 15 million users, a 400% increase year-over-year. Copilot Studio is now used by 230,000 enterprises, growing 130% quarter-over-quarter. Fabric adoption also soared 80%.

Office 365 subscription revenue rose 16% YoY, with penetration rates climbing to 17–18%, primarily among large enterprises with strong willingness to pay.

A recent survey showed that 72% of enterprises plan to adopt M365 Copilot within the next 12 months, potentially reaching 31% of their workforce. This could increase to 43% within three years—up from the 38% projected for Q4 2024.

Other Business Units

Windows revenue will benefit from improved PC demand. According to preliminary IDC data, global PC shipments in Q2 2025 reached 68.4 million units, up 6.5% year-over-year.

Following the acquisition of Activision Blizzard, Microsoft has become a gaming giant. However, the gaming segment is unlikely to outperform significantly and is expected to grow steadily.

LinkedIn contributes only a small share of revenue but maintains its leadership in the recruitment space.

Capex and Layoffs

Microsoft’s capital expenditures are expected to reach a record $17.71 billion this quarter, with full-year 2025 capex projected to hit $100 billion. GPU spending will account for 60% of total server investment.

To support this heavy investment, Microsoft announced a new round of layoffs in early July—around 9,000 employees, or 4% of its total workforce.

Microsoft–OpenAI Relationship Under Scrutiny

Microsoft’s partnership with OpenAI remains a crucial factor. OpenAI’s ChatGPT is the only true “killer app” in the LLM space and has contributed heavily to Azure’s success.

However, recent tensions have emerged. Microsoft has reportedly hindered OpenAI’s plans to transition into a for-profit entity, and both companies are exploring new strategic partnerships.

If this relationship deteriorates, Microsoft’s momentum in AI could face serious challenges.