TLDR
- Microsoft reports fiscal 2026 Q2 earnings January 28 after market close with analysts expecting $3.91 per share and $80.28 billion in revenue
- Azure cloud business posted 40% year-over-year revenue growth in Q1, driven by enterprise AI adoption across multiple model platforms
- Shares trade at 28.5 times forward earnings after 14% decline from October peak, creating potential value entry below five-year average
- Wall Street maintains Strong Buy consensus with 32 Buy ratings and $626 average target despite recent price target cuts across sector
- Options traders anticipate 5.41% post-earnings move as market awaits updates on cloud momentum and AI revenue trajectory
Microsoft releases fiscal 2026 second quarter results on January 28 after the closing bell. Analysts forecast earnings of $3.91 per share for the period.
Wall Street expects revenue to reach $80.28 billion. The earnings projection represents 21% growth versus the year-ago quarter.
Revenue estimates show a 15% increase from last year’s second quarter. The company exceeded earnings forecasts in each of the previous nine quarters.
Shares climbed 7% in 2025 but remain 14% off all-time highs. The stock pullback started after the company’s October earnings announcement.
Azure Powers Enterprise AI Adoption
Azure cloud revenue jumped 40% year-over-year in the first quarter. The platform ranks among top choices for businesses building AI applications.
Microsoft grants Azure users access to multiple AI models. Available options include OpenAI’s ChatGPT, X’s Grok, Meta’s Llama, and Anthropic’s Claude.
This multi-model framework separates Azure from rival platforms. Enterprises value the ability to choose appropriate AI technologies for different use cases.
Microsoft opened new data centers in Atlanta and Wisconsin. These facilities bolster capacity to meet rising cloud and AI service demand.
Office Copilot shows growing user adoption across enterprise customers. Yet Azure metrics drive investor sentiment around Microsoft’s AI strategy.
Valuation Compression Creates Opportunity
The stock trades at 28.5 times forward earnings currently. This multiple falls below the five-year historical average of 31.5 times.
UBS analyst Karl Kierstead kept his Buy rating but lowered the price target to $600. He pointed to solid Azure fundamentals while noting software sector valuation pressures.
Wells Fargo, Cantor Fitzgerald, and Mizuho Securities cut targets as well. All three firms retained Buy-equivalent recommendations on the shares.
These target adjustments reflect industry-wide valuation concerns. Analysts emphasized the changes weren’t based on Microsoft operational issues.
The consensus rating stands at Strong Buy with 32 Buy calls and two Holds. Average analyst price target of $626.14 indicates 34.38% potential upside.
Options activity suggests traders expect a 5.41% swing after earnings. This pricing reflects uncertainty around key cloud and AI performance indicators.
Microsoft traded above 32 times forward earnings in late October. The recent selloff brought valuation more in line with tech sector peers.
Large technology companies typically trade around 30 times forward earnings. Current pricing provides a more reasonable risk-reward profile for new positions.
The company operates diverse business segments beyond cloud services. Other units include Office software, Xbox gaming, LinkedIn networking, and hardware products.
Investor attention focuses on Azure growth rates and AI monetization progress. These metrics will likely dictate the stock’s near-term price direction.
Infrastructure investments signal Microsoft’s commitment to AI market leadership. The platform’s flexibility in offering multiple AI models attracts enterprises across various sectors.
Kierstead noted new data center capacity should support continued Azure expansion. His target reduction reflected sector trends rather than company-specific concerns.
