Microsoft can’t count on AI hype this earnings season. Here’s what matters more.

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Microsoft’s Azure outlook will likely be the biggest focal point of Tuesday afternoon’s earnings report

Microsoft Corp. could face a more discerning investor audience when it reports earnings Tuesday afternoon, as the frenzy around artificial intelligence has waned.

“While last quarter we were all busy revising up our estimates for how big Copilot can be, it seems investors have since tripped and fallen into the trough of AI disillusionment questioning both the actual functionality, the profitability, and ultimately the durable and sustainable competitive advantage,” Wolfe’s Alex Zukin said in an Oct. 18 note to clients.

Wolfe’s Zukin also noted that there could be “some upside potential from AI Services” within Microsoft’s Azure results.Regardless, Microsoft’s forward-looking commentary on Azure is likely to drive the stock following the report, according to TD Cowen analyst Derrick Wood. “Yes, it seems like a fine line to walk and we see scenarios that could steer guidance in either direction , but our expectation is for a down-the-middle guide,” he wrote.

 

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