dpMicrosoft (MSFT) will report its first quarter earnings after the bell on Wednesday, providing the market with a better view of demand for AI apps and services.
This is the first time Microsoft will report earnings under its new segment structure. The company announced the change in Q4, saying that rather than Productivity and Business Processes, Intelligent Cloud, and More Personal Computing, it will switch to two segments: Agents and Infra, and Devices and Consumer.
Microsoft’s Agents and Infra segment will garner the most attention and include the company’s Azure, Microsoft 365 cloud services, productivity and server licensing, industry solutions, and frontier and support services.
Devices and Consumer will include Microsoft’s search and advertising businesses, Xbox, and Windows OEM and devices.
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Investors following the company’s Q1 report will be on the lookout for more information about Azure and Copilot growth as Microsoft continues to push its AI services.
For the quarter, Wall Street is anticipating earnings per share of $4.27 on revenue of $90.6 billion, according to Bloomberg analyst consensus estimates. That would be an improvement from the EPS of $4.13 and revenue of $77.6 billion the company saw in the same period last year.
Agents and Infra revenue is expected to climb 22.5% to $75.6 billion, with Azure and Microsoft 365 bringing in $32.2 billion and $27.4 billion, respectively.
Devices and Consumer sales are projected to decline 6% to $15 billion.
Capital expenditures, including leases, are anticipated to top $45.9 billion in the quarter, up from the $19.3 billion Microsoft spent in Q1 last year.
Remaining performance obligations (RPO) are expected to come in at $705.6 billion, up 77% from the $389 billion reported in fiscal Q1 2026. Read more.
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The AI trade is back, and it’s sorting software stocks into winners and losers
October was the month investors gave this year’s beaten-down software stocks a second chance. Four sessions later, they’re taking it back and buying cybersecurity instead.
For most of October, the trade was easy to spot: Sell chips, buy software. Through the Oct. 22 close, the median stock in a 45-stock Yahoo Finance software basket was up about 13% for the month, while the iShares Semiconductor ETF (SOXX) had lost about 16%.
Then the trade flipped. Since that close, SOXX has jumped about 7%, and the First Trust Nasdaq Cybersecurity ETF (CIBR) has gained about as much, while 26 of the 45 software stocks fell through Tuesday.
Change since the Oct. 22 close through Oct. 27, %. In parentheses: change from Sept. 30 to Oct. 22 · Yahoo Finance Since the Oct. 22 close, the 20 chip stocks in the S&P 500 (^GSPC) have added nearly $570 billion in market value, according to Yahoo Finance calculations through Tuesday. The rest of the index lost about $40 billion.
“For now, early trading this week looks more like rotation within AI than a broad return of conviction,” Vanda Research’s Viraj Patel wrote Wednesday.
Software isn’t breaking down. The equal-weight SPDR S&P Software & Services ETF (XSW) closed at a record on Monday.
Microsoft (MSFT), the biggest software name by market cap, reports after Wednesday’s close. If its AI business keeps growing, the list of winners could get longer. Read more.
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