tradingkey.logo

Microsoft (MSFT) Q3 2025 Earnings Preview: What Should Investors Expect?

TradingKeyApr 29, 2025 10:53 AM

TradingKey - Microsoft will report its 2025Q3 earnings on 30th of April, after the market closes. As one of the big tech companies and part of the Mag 7, Microsoft earnings are always seen as important news.  These are the following aspects investors should pay attention to:

The stock price now is 13% lower than the peak three months ago and the forward PE is standing at 28x, a valuation neither high nor very low considering the growth prospects.

Revenue and Earnings:

The market expects $68.44 billion in revenue and $3.22 earnings per share, 10.6% and 9.7% growth from 2024Q3. The top-line growth shows a certain level of slowdown which can be explained by the maturing market, increased competition and general economic slowdown.

While the revenue number is usually quite easy to predict, the EPS number may fluctuate a lot due to the investment in OpenAI. Last quarter, Microsoft recorded a $1.17 billion loss from the OpenAI investment in its income statement, and we expect this number to increase in the coming quarters, as OpenAI is ramping up investments.

MSFT Businesses Amidst Tariffs:

We believe the software business of MSFT won’t be affected much by the current tariff environment, as the focus of the tariffs doesn’t include software products. However, the business related more closely with personal computing might take a hit due to the worsened consumer sentiment.  

The cloud segment will be subject to scrutiny, as this is the fastest growing business line of the company, and it’s also closely related to the development of AI. In the past quarters Microsoft cloud saw a very high rate of growth of around 20% but due to the supply chain (infrastructure) bottleneck affecting all the cloud players, the cloud operating margins have been quite stagnant.

 Figure 1: Microsoft

Source: Company Reports

The most recent earnings from Alphabet showed Google Cloud margin flat compared with the previous quarters, implying that we won’t see dramatic ramp up in cloud profitability for Microsoft either.  

AI Race Is Far from Over

Even though the main narrative for the equity markets now is tariffs, AI continues to be the centerpiece of the future for the big tech firms. As one of the major AI scalers, it is important for investors to follow the AI developments of the company including:

Capital Expenditures: MSFT plans to spend $80 billion of capex mainly for AI and data centers, thus investors would expect any news on the ROI of this massive amount of spedning.  Any guidance from the management with regard to potential change in the capex plans will also be a valuable insight.

Partnership with OpenAI: OpenAI is perhaps the most important AI company in the world and Microsoft as one of the major investors in it is already tied with the future performance of the Sam Altman’s company. Investors should look for any development in the partnership between the two companies, as well as any change in the terms of their business conditions.

Reviewed byYulia Zeng
Disclaimer: The content of this article solely represents the author's personal opinions and does not reflect the official stance of Tradingkey. It should not be considered as investment advice. The article is intended for reference purposes only, and readers should not base any investment decisions solely on its content. Tradingkey bears no responsibility for any trading outcomes resulting from reliance on this article. Furthermore, Tradingkey cannot guarantee the accuracy of the article's content. Before making any investment decisions, it is advisable to consult an independent financial advisor to fully understand the associated risks.

Recommended Articles