Tech giant Microsoft (MSFT) is scheduled to report its results for the second quarter of Fiscal 2025 after the market closes on Wednesday, January 29. Investors will focus on whether the company’s massive artificial intelligence (AI) investments are generating the desired returns or not. They will also pay attention to Azure’s growth amid the ongoing AI wave. Wall Street expects Microsoft’s Q2 EPS to grow by 6.1% to $3.11 and revenue to rise 11% to $68.89 billion.
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Microsoft has exceeded analysts’ earnings expectations for nine consecutive quarters. For Q1 FY25, the company surpassed the Street’s revenue and earnings estimates, but investors were disappointed with the slower-than-expected revenue guidance for the second quarter.
Analysts’ Views Ahead of MSFT’s Q2 Earnings
Heading into MSFT’s Q2 FY25 earnings, TD Cowen analyst Derrick Wood reiterated a Buy rating on the stock with a price target of $475. The analyst thinks that the company is still moving through “nearer-term cross-currents,” given the developments around MSFT, OpenAI, and Oracle (ORCL) workload shifts, emerging changes in Copilot pricing and packaging strategies, and mixed signals from his data center checks.
He expects the quarter to be impacted by currency headwinds, higher gross margin contraction, and the possibility of deceleration in Azure growth. Overall, Wood expects Microsoft’s Q2 FY25 results and guidance to be in line with the estimates on a constant currency basis.
Additionally, analyst Bradley Sills from Bank of America reiterated a Buy rating on Microsoft stock with a price target of $510. Sills expects a “healthy” upside in Microsoft’s Q2 FY25 revenue and accelerating momentum for FY25, driven by solid growth catalysts in Azure and Office suite. The analyst expects Q2 revenue to come in at $68.6 billion, with a possible upside driven by continued cloud migration to Azure and persistent E3/E5 upgrade cycles, mainly for security features related to M365 Copilot adoption.
Sills thinks that Azure’s year-over-year growth could touch 32.5% in constant currency, fueled by robust contributions from AI. He expects Microsoft to raise its FY25 margin outlook. Overall, MSFT is a Top Pick for Bank of America, with expectations that the company will continue to capitalize on AI-driven growth across applications and infrastructure.
Here’s What Options Traders Expect
Using TipRanks’ Options tool, we can see what options traders are expecting from the stock immediately after its earnings report. The expected earnings move is determined by calculating the at-the-money straddle of the options closest to expiration after the earnings announcement. If this sounds complicated, don’t worry, the Options tool does this for you.
Indeed, it currently says that options traders are expecting a 4.1% move in either direction in reaction to MSFT’s Q2 FY25 results.
Is Microsoft a Buy, Hold, or Sell?
With 27 Buys and two Holds, Microsoft scores a Strong Buy consensus rating. The average MSFT stock price target of $509.42 implies about 15% upside potential. Shares have risen 10.3% over the past year.
