Microsoft (NASDAQ:MSFT) stock is down about 4% today, with the drop coming amid a broader selloff across the software sector, led by steep declines in ServiceNow and IBM. Those earnings-driven moves raised concerns about enterprise demand and spending trends. As a result, investors are taking a more cautious view of near-term growth expectations, especially as questions around AI monetization and elevated investment levels continue to linger.
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The timing of the pullback comes after a solid rebound in Microsoft shares over recent sessions. The stock has been somewhat volatile this year, swinging between optimism around AI-driven growth and periods of caution linked to the scale of capital spending and how fast those investments translate into revenue.
Now, all eyes are on Microsoft’s upcoming March quarter results, set for release next Wednesday, April 29. The report is shaping up as a key catalyst, with investors looking for clear evidence that Microsoft’s aggressive push into AI and cloud infrastructure is delivering tangible returns. Azure growth will be front and center, but just as important will be updates on Copilot, which has become a core part of the company’s AI story.
Heading into the print, Piper Sandler analyst Billy Fitzsimmons sees two main investor debates emerging since the last readout. First, the push to allocate more capacity for internal use could translate into “lighter Azure beats.” Second, Copilot appears to be trailing the native functionality offered by leading frontier model providers, at a time when seat-based pricing models are facing pressure. Separately, there is a possibility that management uses the F3Q call to signal higher capex and/or provide early indications around FY27 capex.
Azure growth is set to remain the key focal point, especially in the context of the first-party vs. third-party mix debate. After the disclosure of 15 million seats last quarter, Fitzsimmons thinks any incremental updates on Microsoft 365 Copilot adoption and monetization would likely be taken positively by investors, particularly as Microsoft manages constrained compute capacity.
As for the numbers, Microsoft called for F3Q26 total revenue growth of 15.9% year-over-year (about 13% in constant currency at the midpoint), along with Azure revenue growth of 37% to 38% cc. Street expectations are slightly higher at 16.1% total revenue growth and $26.9 billion in Azure revenue, implying roughly 40% growth and a modest acceleration from 39.4% in F2Q.
On the cost side, F3Q operating expenses were guided to $17.85 billion at the midpoint, including a 2-percentage point FX tailwind, vs. consensus at $17.86 billion. Capex plus lease spend was guided to decline quarter-over-quarter. Fitzsimmons is calling for $36 billion in capex plus lease, which implies 68% year-over-year growth compared to 66% last quarter, and a 4% QoQ drop. The analyst also notes that his first-quarter partner checks were “most positive” on Microsoft.
For F4Q, the Street is forecasting total revenue of $87.6 billion, up 14.6% year-over-year. Consensus estimates also point to a 44.8% operating margin and EPS of $4.27. For the full year, capex plus lease spending is expected to grow faster than the prior year’s 58% increase, with Fitzsimmons’ model at 66% growth, implying total capex plus lease of $146 billion.
Looking at the bigger picture, Fitzsimmons notes that Copilot has shown improvement year-to-date, and the analyst views the company’s multi-model strategy as a differentiator. Regarding Azure, the analyst points out that Microsoft stands out as one of the few players able to monetize the growth of both OpenAI and Anthropic.
All told, MSFT remains a top pick for Fitzsimmons, who assigns the stock an Overweight (i.e., Buy) rating alongside a $500 price target. Should the figure be met, investors will be pocketing returns of 18% a year from now. (To watch Fitzsimmons’ track record, click here)
33 other analysts join Fitzsimmons in the bull camp, while an additional 2 Holds can’t detract from a Strong Buy consensus rating. Going by the $573.99 average price target, a year from now, investors will be pocketing 38% returns. (See MSFT stock forecast)
Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.