Key Points

  • Its Azure cloud business needs to beat expectations this quarter.

  • Data center spending guidance will be a key focus for investors.

  • 10 stocks we like better than Microsoft ›

Microsoft (NASDAQ: MSFT) has been a poor stock to own over the past year. It's down nearly 30% from its all-time high, although it was down around 35% at the lows of its sell-off. However, I think that could all change on July 29, when Microsoft reports Q4 earnings, which could kick-start the stock's long-awaited rebound.

Microsoft's stock is undervalued and looks like a great buy right now. If the company reports soaring growth in a few key divisions, that could give the market exactly what it needs to see for a major rally in Microsoft's stock.

Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »

All eyes will be focused on two items

Microsoft is a huge company with a wide-ranging business spanning productivity software, gaming, hardware sales, and cloud computing. However, despite Microsoft's size, two factors will drive the response to the earnings report.

First is cloud computing growth. Azure, Microsoft's cloud computing platform, offers a glimpse into the strength of overall AI spending, as several companies, including OpenAI, run AI workflows on Microsoft's servers. As Azure's revenue rises, it shows that more computing capacity is coming online and that it's being contracted out as quickly as it comes online.

Last quarter, Azure's revenue rose 40% year over year. However, investors will want to see a significant acceleration in revenue this quarter.

Microsoft's competitor in the cloud computing space, Alphabet, saw tremendous growth during its previous quarter. Google Cloud's Q2 revenue rose 82% year over year, a major acceleration from Q1's 63% growth. If Microsoft maintains its 40% growth rate, that may raise red flags, as it would show that Alphabet is expanding far faster than Microsoft. I doubt that happens, and if Azure can report rapid growth, that will be the first catalyst Microsoft stock needs to start a rebound.

The second, and maybe most important, factor will be the fiscal 2027 capital expenditure guidance. Alphabet's stock got hammered following earnings after it bumped up capital expenditures by $10 billion. If the market deemed Microsoft's spending unreasonable, a sell-off may ensue. However, Microsoft's spending has already been tempered compared to its peers, so I don't expect this to happen.

If Azure's growth rate comes in ahead of expectations and capital exposure guidance is in line, I think Microsoft stock is primed to soar after July 29. But if it misses either of these two projections, the stock could tumble even further.

Should you buy stock in Microsoft right now?

Before you buy stock in Microsoft, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Microsoft wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $377,990!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,269,518!*

Now, it’s worth noting Stock Advisor’s total average return is 896% — a market-crushing outperformance compared to 206% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.

*Stock Advisor returns as of July 25, 2026.

Keithen Drury has positions in Alphabet and Microsoft. The Motley Fool has positions in and recommends Alphabet and Microsoft. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.