Microsoft’s AI momentum, Azure growth in focus as Q2 results loom

Microsoft (NASDAQ:MSFT) is set to report fiscal Q2 earnings on Wednesday, July 30th, after market close, with analysts expecting EPS of $3.38 and revenue of $73.83 billion, up 19% year-over-year. Investor sentiment remains strong, with 27 upward EPS revisions and 31 for revenue over the past three months.

At the center of attention is Microsoft’s AI advantage, which has been a key growth driver for its Azure cloud business. The partnership with OpenAI has boosted Azure revenue, but investor focus is shifting to risks around the OpenAI relationship, as the AI startup deepens ties with rivals Google (GOOG) (GOOGL), Oracle (ORCL), and CoreWeave (CRWV), while exploring a $40B funding round and potential public-benefit corporation conversion — a move requiring Microsoft’s approval.

Meanwhile, OpenAI is expanding its partnerships, deepening its Oracle collaboration with plans for 4.5 gigawatts of data center capacity, and adding Google Cloud as a cloud infrastructure provider.

Capital spending will also be closely watched. After Alphabet raised its annual capex by $10 billion last week, Microsoft’s own investment trajectory is in focus. The company previously signaled more than $80 billion in capex last fiscal year, mostly tied to AI infrastructure, and remains capacity-constrained on AI. Any updates on spending pace, particularly on AI chips and data centers, could influence the outlook for Azure and Microsoft’s position in the AI race.