Zhi Tong Cai Jing·2026-01-26 07:10Core Viewpoint - Microsoft is set to report its Q2 FY2026 earnings on January 28, with expected revenue of $80.23 billion, reflecting a 15.2% growth, and an anticipated EPS of $3.88, representing a 20.1% year-over-year increase. The market's focus is shifting from overall performance to the execution in cloud business growth, AI monetization, and profit margins [1][2]. Revenue Growth - Cloud Computing as Core Driver - Azure remains the central driver of the earnings narrative, with market concerns focusing on whether cloud growth has stabilized or is re-accelerating compared to the previous quarter. Key indicators such as commercial bookings and remaining performance obligations (RPO) will be closely monitored [3]. AI Monetization - Evidence vs. Narrative - AI is crucial to Microsoft's valuation, but the market is seeking tangible evidence of revenue generation from AI. Attention will be on the adoption rates of Copilot in both enterprise and consumer sectors, whether this adoption is through paid or bundled models, and if AI workloads are reflected in Azure billing [6]. Profit Margins - Cloud Efficiency and Rising Costs - Profit margins are a critical sensitivity point as Microsoft increases investments in AI and data centers. The market will compare operating margins with the previous quarter to assess whether cloud computing efficiencies can offset rising costs in computing power, energy, and infrastructure [7][8]. Productivity and Personal Computing - Beyond cloud and AI, Microsoft's productivity and PC segments may signal potential demand. Pricing power in Office and Microsoft 365 will be viewed as indicators of enterprise resilience, while Windows OEM demand may suggest stabilization in the PC cycle [9]. True Catalyst - Guidance and Outlook - Guidance is likely to drive post-earnings reactions, with the market focusing on the tone for Q1 and the full year, particularly regarding cloud demand and spending trends. Investors will look for clear responses from management on Azure's growth outlook and whether AI revenue expectations are quantified or remain qualitative [11]. Capital Expenditures and Investment Spending - As Microsoft continues to expand AI and data center investments, capital expenditure guidance will be scrutinized. The market remains sensitive to narratives of "spending first, profiting later," especially in a high-interest-rate environment. Indications that high capital expenditure intensity will persist longer than expected could pressure market sentiment [12].