After Alphabet raised its 2026 CapEx forecast, analysts believe cloud peers Microsoft and Amazon could follow suit.
- Any changes to the CapEx view will likely have a bigger bearing on the stock than other metrics in the earnings report.
- Analysts expect Microsoft Q4 revenue and adjusted EPS to rise by 15% each.
- Retail sentiment for MSFT has held steady over the past few weeks and was ‘neutral’ on Wednesday.
Microsoft rose 1% in early premarket trading on Wednesday, ahead of its quarterly report after the markets close.
Once one of the key stocks rising in the AI wave, Microsoft has lost its crown as investors’ focus has turned to its heavy spending and increasing competition from AI and cloud rivals.
Microsoft has forecast spending $190 billion in capital expenditures in calendar year 2026. The spending trend in the fiscal fourth quarter, which ended in June, as well as any changes to its full-year guidance, would be closely watched.
Alphabet’s move makes it more likely that Amazon and Microsoft will follow suit, according to Evercore ISI. Alphabet’s capex boost “increases the odds of similar behavior” from Amazon and Microsoft, analyst Mark Mahaney said in a recent investor note.
Shares of Amazon, Meta and Microsoft tumbled last week after Alphabet’s CapEx forecast hike, even as the search company reported accelerating cloud growth.
The growth in Amazon’s cloud unit, Azure, would also be key, with Google setting a high bar. Google Cloud sales increased a record 82% last quarter. Revenue from Microsoft’s Azure and other cloud services grew 40% in the company’s fiscal third quarter.
Investors will also closely track subscription growth for Microsoft’s flagship AI product, Microsoft 365 Copilot, which has seen tepid adoption.
Microsoft Woes
Although shares have risen in July, it has been a difficult stretch for Microsoft in the stock market. MSFT shares fell 23% in the first six months of the year, marking their worst half-year performance since 2000 and the weakest showing among the Magnificent Seven stocks in the first half of 2026. MSFT is down 18.3% year-to-date.
Microsoft has come under pressure amid a broader selloff in software stocks, hefty capital spending plans and intensifying competition in AI from Google, Anthropic, and OpenAI.
Earlier this month, Microsoft carried out a major restructuring at its Xbox division, cutting some 3,200 jobs. The company also said at the time that it would sell or spin off five game development studios.
In June, Microsoft eliminated 6,000 roles, or about 4% of its workforce, primarily across product and engineering teams.
Analysts’ Expectations from MSFT’s Q4 Results
Analysts expect Microsoft’s fiscal fourth quarter revenue to rise 15% to $87.63 billion – which would be the lowest in the last five quarters – and adjusted profit to also increase by the same degree to $4.22 per share, per Koyfin data.
Currently, 50 out of 53 analysts rate MSFT stock ‘Buy’ or higher and the remaining three rate it ‘Hold,’ per Koyfin data. Their average price target of $555.77 implies a 41% upside from the stock’s closing price on Tuesday.
Retail View On MSFT
On Stocktwits, the retail sentiment for MSFT was ‘neutral,’ unchanged for the past two weeks.
“$MSFT this has taken a nosedive too many times after earnings. I think PT’s will be on track after tomorrow. 550 years end,” a trader wrote, forecasting the stock to run 40% higher.
To be sure, the Federal Reserve’s interest rate decision on Wednesday afternoon will also likely influence Microsoft stock and the broader market.
Microsoft’s earnings report will coincide with that from Meta Platforms.
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