Bank of America analysts are ramping up expectations for Alphabet Inc. (NASDAQ:GOOGL) and Microsoft Corp. (NASDAQ:MSFT), forecasting above-consensus earnings on strong artificial intelligence tailwinds, ad recovery and robust enterprise software demand heading into quarterly results later this month.
Alphabet Expected To Outperform On Search and FX Tailwinds
Alphabet reports its second-quarter results on July 23, and Bank of America analyst Justin Post said the stock looks well-positioned to beat expectations, driven by ad strength, macroeconomic tailwinds, and product monetization improvements from AI.
Post revised its revenue and earnings estimate to $81 billion and $2.21 per share, up from prior forecasts of $80 billion and $2.15. Wall Street consensus sits lower at $79.5 billion and $2.15.
Alphabet's core search revenue is expected to rise 11% year-over-year, ahead of Street estimates of 9%.
Search revenue has been the most closely watched—and arguably the most feared—metric for investors, as the rise of AI platforms threatens to bypass traditional search engines and disrupt Google’s core business model.
"We think Street estimates for Search… have upside," Post said, citing stable spending trends and FX that could add two points of growth.
He also indicated that the company's AI-driven features, like AI Overviews and AI Mode, are reducing click volumes but improving conversion rates, which is ultimately a monetization win.
Cloud revenue is forecasted at $13.2 billion, modestly above the $13.1 billion Street view, with additional upside potential from price hikes in Workspace.
Post raised the price target from $200 to $210, implying a 14% upside from current levels. The analyst flagged that Alphabet trades at an attractive 12x multiple on 2026 core Google earnings, compared to 21x for the S&P 500.
Alphabet stock is up 10% since its I/O conference on May 20, but remains down 2.4% year-to-date. Notably, Alphabet has underperformed compared to the Roundhill Magnificent Seven ETF (NYSE:MAGS), which has risen 5% year-to-date.
Microsoft Gets Lift from Azure Strength And Copilot Uptake
Microsoft reports its fiscal fourt-quarter results on July 30, and the firm analyst Brad Sills said checks with partners show steady demand trends, particularly for Azure and enterprise software like Office.
Azure is projected to grow 35.5% year-over-year in constant currency, driven by cloud migrations, security needs, and AI services.
In Microsoft's productivity and business processes segment, Office growth could reach 15% versus the previously guided 14%, thanks to commercial upgrades and the growing adoption of Copilot, Microsoft's generative AI assistant. The firm also sees upside in PC shipments, which tracked 7% year-over-year in the second quarter, outperforming the 4% expected.
Looking further ahead, Sills expects Microsoft's revenue to grow 14% in fiscal 2026, the same pace as in 2025, with Azure taking up a larger share. However, margins might flatten as capital expenditures (capex) ramps—forecasted to hit $99.1 billion, roughly 31% of revenue.
Sills said the next big test will be whether Copilot drives incremental top-line growth.
"While an inflection quarter is unlikely, we believe Copilot has potential to drive incremental growth as we move through FY26."
Microsoft stock has rallied 22% in 2025, trailing only Nvidia Corp. (NASDAQ:NVDA)’s 28% rally in the Magnificent Seven group.
Bank of America reiterated its Buy rating and lifted the price target from $515 to $585, implying a 15% upside from current levels.
Price Action: Alphabet shares were up 0.62% at $184.71 and Microsoft shares were down 0.32% at $510.08 at the time of publication Friday, according to Benzinga Pro.
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