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Tech giant Microsoft (MSFT) will report its fourth-quarter earnings for fiscal 2025 on July 30. The company’s stock has been on an impressive run, gaining roughly 31% over the past three months and recently hitting a record high of $514.64. This surge reflects Microsoft’s solid growth led by significant demand for its artificial intelligence (AI) and cloud offerings.
For instance, in the previous quarter, Microsoft reported revenue of $70.1 billion, marking a 13% increase compared to the same period last year. Earnings per share (EPS) also impressed, climbing 18% to reach $3.46. These numbers highlight the underlying strength of Microsoft’s business, mainly driven by sustained demand for its Azure cloud services and AI-driven products.
While Microsoft continues to see solid momentum in its business, the stock’s rapid ascent has stretched its valuation. While Microsoft may still post strong results for Q4, the current price level reflects a lot of optimism already baked in. With this backdrop, let’s take a look at analysts’ expectations for Q4.
Microsoft’s Q4 Outlook: Momentum Driven by Cloud and AI
Looking ahead to the upcoming earnings report, the momentum in MSFT’s business will likely sustain. Microsoft’s strategic investments in AI, including its partnership with OpenAI and the integration of AI tools across its product suite, could continue to drive top-line growth. Enterprise customers remain heavily invested in digital transformation, and Microsoft is well-positioned to capitalize on this trend.
One of the clearest signs of strength in Microsoft’s business is its growing commercial remaining performance obligations, a key metric that reflects future revenue under contract. That figure surged 34% year-over-year in the previous quarter to $315 billion, with management estimating that roughly 40% of this will convert into revenue over the next 12 months. This offers strong visibility and confidence in the company’s earnings trajectory heading into Q4.
Cloud remains a key growth catalyst for MSFT. Despite capacity constraints, Azure is expected to deliver robust results. Management is forecasting another strong quarter for its Intelligent Cloud segment, with revenue projected in the range of $28.75 billion to $29.05 billion. This segment continues to benefit from increasing enterprise cloud adoption and the growing use of AI-powered services.
Meanwhile, Microsoft’s More Personal Computing segment is expected to contribute between $12.35 billion and $12.85 billion in revenue for the quarter. Within this division, search and news advertising is poised for high-teens growth, supported by a rising user base and improved monetization per search. The gaming division is also set for solid gains, with mid-single-digit growth projected overall, and high-single-digit expansion in Xbox content and services.
While the company's aggressive build-out of AI infrastructure may slightly pressure margins, Microsoft’s ongoing focus on operational efficiency should help mitigate any near-term profitability concerns. Importantly, Wall Street remains bullish on the bottom line. Analysts expect earnings of $3.35 per share in Q4, up 13.6% from the $2.95 recorded a year ago.
Adding to investor confidence is Microsoft’s impressive track record of beating expectations. The company has outperformed analysts’ earnings forecasts for the past four consecutive quarters — including an 8.13% beat last quarter. With a history of delivering both solid revenue growth and upside surprises, Microsoft looks well-positioned to exceed expectations once again and strengthen its position in the AI and cloud sector.
Here’s What Analysts Recommend for MSFT Stock
Despite the recent surge in MSFT’s stock price, analysts are bullish. Analysts continue to give Microsoft a “Strong Buy” consensus rating as the company gears up to report its Q4 earnings. Analysts see more room for growth. The average price target for MSFT stock stands at $552.35, suggesting potential 8% gains even after the recent rally. Moreover, the highest price target for Microsoft stock is $626, representing around 23% upside from current price levels.
Is Now the Time to Buy MSFT Stock?
While its valuation may be somewhat stretched in the short term, Microsoft’s fundamentals, earnings momentum, and leadership in high-growth areas such as AI and cloud computing make it a compelling long-term investment.
On the date of publication, Amit Singh did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
