Microsoft to report Q2 earnings with investors eyeing AI growth and spending

Microsoft (MSFT) volition study its fiscal 2nd 4th net connected Wednesday, and 1 fig successful peculiar volition beryllium connected investors’ minds: remaining show obligations (RPO).

The measurement, which refers to contracts Microsoft has with customers that haven’t been paid retired yet, has go a large metric to assistance Wall Street get a amended thought of wide AI demand.

In its anterior quarter, Microsoft revealed that it had $392 cardinal successful RPO, and according to Jefferies expert Brent Thill, that volition summation successful Q2.

“[Fiscal Q2] RPO should amusement the largest sequential step-up ever, driven by inclusion of the $250 cardinal [OpenAI] committedness & Anthropic’s $30 cardinal Azure compute agreements, reinforcing unprecedented multi‑year request visibility underpinning a beardown durable maturation outlook for Azure and [M365 Commercial],” Thill wrote successful a enactment to investors.

Microsoft is seeing reaccelerating unreality gross maturation acknowledgment to the AI explosion, which is boosting its Azure business.

But the institution is besides facing capableness constraints, meaning lawsuit request for AI services is outpacing Microsoft’s quality to proviso it, putting an artificial headdress connected the Windows maker’s revenue.

That’s besides wherefore the institution is pouring billions much into superior expenditures, with Microsoft CFO Amy Hood saying that the bundle steadfast expects to summation fiscal 2026 capex implicit past year’s $88.2 billion. The institution already spent $34.9 cardinal successful Q1.

For the quarter, Microsoft is expected to study net per stock (EPS) of $3.92 connected gross of $80.3 billion, according to Bloomberg expert statement estimates. That’s up from an EPS of $3.23 and gross of $69.6 cardinal the institution saw successful Q2 past year.

Commercial unreality gross is expected to leap 25% to $51.2 billion, though gross margins are expected to diminution 4.89%.

Microsoft’s Productivity and Business Processes is anticipated to deed $33.6 billion, up 14% twelvemonth implicit year, portion its Intelligent Cloud conception gross is acceptable to ascent 26% to $32.2 billion. The company’s More Personal Computing concern is acceptable to bring successful $14.3 billion.

Microsoft’s banal terms is up conscionable 4% implicit the past 12 months, somewhat outpacing unreality rival Amazon (AMZN), which is up a specified 1.6% successful the aforesaid clip period.

Both companies, however, are being blown distant by Google’s (GOOG, GOOGL) stock, which is up a stunning 64% implicit the past 12 months.

Much of that maturation is tied to the debut of Google’s Gemini 3, which established the institution arsenic the AI exemplary person up of Microsoft state OpenAI (OPAI.PVT) and its ChatGPT.

Email Daniel Howley astatine [email protected]. Follow him connected Twitter astatine @DanielHowley.