Microsoft Earnings Are Coming—But Azure and CapEx Will Decide the Reaction

Summary

Microsoft Today$381.58 -8.76 (-2.24%) As of 07/23/2026 04:00 PM Eastern52-Week Range$349.20▼$555.45Dividend Yield0.95%P/E Ratio22.71Price Target$555.40Microsoft Corp. NASDAQ: MSFT reports fiscal fourth-quarter 2026 earnings on July 29. It’s likely that Microsoft will beat both top- and bottom-line estimates. However, investors will be more focused on what management says about capital expenditures (CapEx) in fiscal year 2027 (FY2027). Analysts expect diluted earnings per share (EPS) of $4.21, up 15.3% from a year ago. Microsoft has beaten estimates for four straight quarters. That part of the story is almost routine and is why MSFT has delivered a total return of over 680% in the last 10 years.Get Microsoft alerts:Sign Up But what’s happened in the past doesn’t remove the real tension that investors are facing. That sits in one line item: CapEx spending. MSFT is down 29% from its record high, even as the AI trade keeps expanding. Investors are worried that Microsoft has unleashed a spending machine that will never slow down. Why the CapEx Number Outweighs the Earnings BeatThird-quarter CapEx came in at $31.9 billion, up 49% year over year. Not surprisingly, free cash flow (FCF) fell 22% to $15.8 billion. That combination—soaring spend, shrinking cash generation—summarizes what makes Wall Street nervous heading into July 29. Because this report marks the end of its fiscal year, Microsoft has to guide for FY2027. Analysts expect CapEx growth in the 20% to 30% range, which would mean around $220 billion. That number will set the tone for the entire AI trade, not just Microsoft. A figure near $220 billion would represent roughly 20% to 30% growth, in line with what's already priced into shares. It signals discipline, not excess. That range also matters because it keeps CapEx growth below Azure's. Microsoft's cloud engine can't keep funding its own buildout if spending outpaces the growth it's meant to support. Analysts are already tracking this math closely. Full-year 2...