Wall Street analysts aren't expecting fireworks from Microsoft's fiscal first-quarter report on Tuesday. But steady progress on the company's cloud computing and artificial intelligence initiatives could be a catalyst for MSFT stock.
Analysts polled by FactSet expect Microsoft earnings per share to rise 13% year over year to $2.65 in the September quarter. Microsoft sales are seen climbing 9% to $54.5 billion.
Key focus areas for the report will be Microsoft's cloud computing businesses, including Azure infrastructure services and Office 365 productivity software. Wall Street also will be looking for updates on Microsoft's AI push, including its Copilot services.
The fiscal Q1 report will be the company's first since it closed its $69 billion acquisition of video game publisher Activision Blizzard on Oct. 13.
MSFT Stock In Consolidation Pattern
MSFT stock has been consolidating for the past 14 weeks with a buy point of 366.78, according to IBD MarketSmith charts. However, aggressive traders could use Microsoft's Sept. 14 high of 340.86 as an early entry, according to IBD analysis.
On the stock market today, MSFT stock slid 1.4% to close at 326.67 during an overall rough day for stocks.
TD Cowen analyst Derrick Wood on Friday reiterated his outperform rating on MSFT stock with a price target of 390. In a note to clients, Wood said he expects an in-line quarter and outlook from Microsoft.
The big three hyperscale cloud computing providers are facing elevated pressure in new bookings as customers seek to optimize their spending, Wood said. Microsoft's main competition in the market is Amazon.com's Amazon Web Services and Alphabet's Google Cloud.
The growth of generative AI services is providing an emerging tailwind for cloud services, Wood said.
"Overall, we expect to see continued solid execution against guidance, but expectations are relatively high," Wood said. "Our sense is that the setup will get more favorable as we move into the March and June quarters."
Microsoft Is On Two IBD Stock Lists
Elsewhere on Wall Street, KeyBanc Capital Markets analyst Michael Turits kept his overweight rating on MSFT stock with a price target of 400.
"We remain positive on Microsoft's leadership from infrastructure to applications, and as a beneficiary of generative AI," Turits said in a report. He noted that the company's Microsoft 365 Copilot AI product will reach general availability for enterprise customers on Nov. 1.
Meanwhile, Guggenheim Securities analyst John DiFucci is neutral on MSFT stock, given its lack of near-term catalysts.
"We don't expect this quarter's results to provide a strong indication of Microsoft's development in gen-AI in either direction, which is the narrative that we believe will drive the stock's progression over the medium term," DiFucci said in a client note.
Microsoft's fiscal second-quarter results will provide a better indication, given that it will include two months of sales of Microsoft 365 Copilot, he said.
MSFT stock is on two IBD lists: Tech Leaders and Long-Term Leaders.
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