Microsoft heads into its latest earnings report under intense pressure, with investors looking beyond ambitious artificial intelligence plans and focusing instead on whether the company is generating stronger returns from its heavy spending.
Options traders expect Microsoft’s share price to move about 6.6% in either direction after the company releases its fourth-quarter results on Wednesday. Based on the company’s market value, that represents a swing of roughly $190 billion.
The expected move is much larger than usual. According to Option Research & Technology Services (ORATS), Microsoft’s options have implied an average earnings move of 4.8% over the past 12 quarters, while the stock has actually moved about 4.4% during that period.
This time, investors are paying more for protection and bigger bets because Microsoft’s results are widely seen as one of the biggest tests of whether years of AI investment are beginning to provide noteworthy financial returns.
Wall Street expects Microsoft to report revenue of about $87.7 billion, up roughly 15% from a year earlier, while earnings per share are forecast at around $4.22.
One of the biggest numbers investors will watch is Azure. The cloud business expanded by 40% in constant currency during the previous quarter. Analysts now expect growth to remain above 35%, a level many believe would support Microsoft’s continued investment in AI infrastructure.
The focus has also moved to how businesses are using Microsoft’s AI products. Investors want evidence that enterprise customers are adopting services such as Copilot, AI-powered security tools and Dynamics AI rather than choosing competing platforms.
Seth Hickle, chief investment officer at Mindset Wealth Management, said: “The market is looking for results. This earnings season is about AI execution, not AI enthusiasm.”
Microsoft has spent heavily to build out its AI infrastructure. Capital expenditure reached $31.9 billion in its fiscal third quarter, a 49% increase from a year earlier, although it was lower than the previous quarter’s $37.5 billion.
The company is expected to spend about $190 billion on capital expenditure during fiscal 2026, with projections rising to around $220 billion in fiscal 2027.
Those figures have left investors concerned, especially after reports revealed that the world’s largest cloud providers could spend more on capital projects than they generate in free cash flow by 2027.
Peter Andersen, founder and chief executive of Andersen Capital Management, said: “Investors have seen the AI spending. Now they want to see the receipts.”
He added: “FOMO ‘Fear of Missing Out’ is now ‘Fear of Massive Overbuilding’.”
Microsoft’s shares have fallen between 18% and 20% this year, trailing the market. Over the same period, the S&P 500 has gained about 8.5%.
Despite those concerns, many investors are still backing the company.
Chris Murphy, co-head of derivatives strategy at Susquehanna, said a trader spent about $10.4 million buying 20,000 Microsoft call options earlier this week. The position reflects a bet that the stock will climb above $450 by August.
Murphy said: “Investors were willing to pay high option premiums for upside exposure.”
Trust has also spread across the software sector, with investors bringing 100,000 call options tied to the iShares Expanded Tech-Software Sector ETF ahead of Microsoft’s earnings and the US Federal Reserve’s policy decision.
This means the sector could benefit if Microsoft’s results exceed expectations.
