We are now in the busiest week of this earnings season. Specifically, four Magnificent 7 stocks, namely Microsoft (MSFT), Meta Platforms (META), Amazon (AMZN), and Alphabet (GOOG) (GOOGL), will release their quarterly earnings after the bell today, April 29, which will be followed by Apple’s (AAPL) earnings tomorrow.
With a year-to-date (YTD) loss of over 11%, Microsoft is the second-worst performing Mag 7 stock this year, trailing only Tesla (TSLA). Let's explore whether Microsoft’s fiscal Q3 2026 earnings will bring any succor for investors or whether the stock will continue its underperformance.
Microsoft Fiscal Q3 Earnings Estimates
Let’s begin by looking at Microsoft’s fiscal Q3 2026 earnings estimates. Analysts expect Microsoft to report revenues of $81.4 billion in the March quarter—a year-over-year (YoY) rise of 16.2%. Its earnings per share (EPS) are expected to rise 17.6% to $4.07 over the period.
Apart from the headline numbers, I will watch out for the following during Microsoft’s fiscal Q3 earnings call.
- OpenAI Relationship: OpenAI and Microsoft recently amended their relationship, which the release says is “grounded in flexibility, certainty, and a focus on delivering the benefits of AI (artificial intelligence) broadly.” Under the new agreement, while Microsoft would remain OpenAI's primary cloud provider, the ChatGPT parent can now serve customers across any cloud provider. Microsoft will no longer pay a revenue share to OpenAI. While it would continue to receive the same revenue share from OpenAI until 2030, it would be subject to a cap. During the earnings call, I will watch out for more updates on that partnership, which has visibly and gradually soured over the last couple of years.
- Cloud Growth: During the fiscal Q2 earnings call, Microsoft said that its cloud remaining performance obligations (RPOs) more than doubled YoY to $625 billion. It disclosed that nearly 45% of these came from OpenAI. Azure, meanwhile, reported a 39% revenue growth in the December quarter, which was short of estimates. Management noted that Azure could have grown faster if not for supply constraints. During the Q3 earnings call, I will watch out for commentary on the cloud business, including whether the company is still constrained by supply.
- AI Monetization: I will also await updates on AI monetization, as that has been a recurring area of concern for hyperscalers. During the previous earnings call, Microsoft said that it had 15 million paid 365 Copilot seats. It will be crucial to follow that number as well as the average revenue per user.
MSFT Stock Forecast
Wall Street analysts don’t seem too bullish on MSFT heading into the confessional, and multiple brokerages, including Piper Sandler, Mizuho, BNP Paribas, Baird, Cowen, Citigroup, and Rothschild & Co Redburn, have lowered their target prices this month.
However, not all analysts are turning their back on the stock, and Goldman Sachs maintained its “Buy” rating and $600 target price earlier this month. In a big vote of confidence, Michael Burry disclosed that he is long on MSFT. Notably, last year the “Big Short” investor alleged that hyperscalers were overstating their earnings by extending the useful life of their AI assets—a phenomenon he said was “one of the more common frauds of the modern era.”
Should You Buy MSFT Stock Before Q3 Earnings?
Microsoft’s valuations look reasonable at a forward price-to-earnings (P/E) multiple of 25x. While arguably the multiples are much lower than historical averages, Microsoft’s soaring capex has put a dent in its once premium valuations.
I am constructive on MSFT stock heading into the earnings, as the pessimism already looks baked into the stock, which paves the way for a post-earnings rally, unless the company comes up with a hideous set of numbers, but that probability looks dim to me.
On the date of publication, Mohit Oberoi had a position in: MSFT , GOOG , META , TSLA , AMZN . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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