Zinger Key Points
- Analysts expect Microsoft to report quarterly earnings of $3.12 per share on revenue of $68.8 billion.
- Oppenheimer views the DeepSeek LLM model as “very positive for the overall AI foodchain/ecosystem.”
- Get the Real Story Behind Every Major Earnings Report
Microsoft Corp. MSFT is set to report its second-quarter financial results on Wednesday after the closing bell. Wall Street and investors will be watching closely as recent developments with DeepSeek and Stargate have brought Microsoft's AI strategy into the spotlight.
Azure: Investors will closely monitor Azure’s performance as the cloud computing services business remains Microsoft’s core growth engine. Analysts are anticipating Azure revenue growth of between 31% and 32% during the second quarter.
OpenAI: Wall Street and investors are looking for clarity on the relationship between Microsoft and OpenAI, particularly following the Stargate announcement last week.
Oppenheimer analyst Timothy Horan highlighted OpenAI's move to a for-profit company and accounting for OpenAI's revenue and expenses as his top questions in a preview note released Tuesday. Horan noted that half of OpenAI's losses are "likely to accelerate", half of which flow to Microsoft and he sees as underestimated by the Street.
CapEx: Microsoft’s substantial investments in AI and data centers have raised questions about future profitability and investors will look for clarity on the timeline for returns on these investments in the Q2 report and earnings call.
Microsoft's capital expenditures have been higher than expected for the past several quarters, Horan said, and analysts expect $21 billion in the current report. He added that the Street is "too optimistic" on the near-term returns on the AI investments.
DeepSeek: The surprise release of DeepSeek by a Chinese AI start-up over the weekend rattled the AI and semiconductor markets. Investors will be interested in hearing any commentary from Microsoft's management regarding DeepSeek and its relevance to OpenAI and Microsoft's AI development.
Oppenheimer sees the cheaper, faster DeepSeek LLM model as "very positive for the overall AI foodchain/ecosystem."
Expert Ideas: According to estimates from Benzinga Pro, analysts expect Microsoft to report quarterly earnings of $3.12 per share on revenue of $68.8 billion. The company has beat analysts' expectations on the top and bottom lines for the past seven consecutive quarters.
Price Action: According to Benzinga Pro, Microsoft shares are up 2.68% at $446.20 at the time of publication Tuesday.
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