Microsoft will report third-quarter earnings after its stock market ended on Wednesday. Analysts predict that even if the company puts billions of dollars into artificial intelligence and earnings per share of $3.22, revenue will rise 10.6% year-on-year to $68.4 billion. The company beat Wall Street's expectations for each of the previous three quarterly earnings reports.
Analysts said they viewed the earnings report as a temperature check of Microsoft's artificial intelligence business, which announced that it only invested about $80 billion in the fiscal year alone, although it also terminated some data center rentals in recent months. The company has invested billions in OpenAI in recent years, providing a large stake in Chatgpt developers.
Microsoft's massive bet on AI has expanded to dealing with companies outside of Openai, which has led to Microsoft and its investors relying on the success and widespread adoption of the technology. Meanwhile, Microsoft has invested in AI because it is at the forefront of world-changing technologies, and its claim is crucial to the future of American industry.
"Since the invention of electricity, the United States has had the opportunity to use new technologies to inspire the American economy," Smith said in a January blog post. "In many ways, artificial intelligence is the power of our time."
Microsoft executives have also been touting the AI-driven future in their recent appearances. Nadella claimed earlier this week that 20 to 30 percent of the company's code was written by AI, although there was no specific information on how the number was calculated. Meanwhile, Chief Technology Officer Kevin Scott predicted this month that 95% of the code will be generated in AI over the next five years.
Last quarter, Microsoft reported revenue from its AI business grew 12% and touted growth — a 175% increase in the year it reported.
Investors have also been watching Microsoft's Azure cloud computing service's performance after revenue declined in the last quarter. The company has been seeking to expand Azure across Europe, and President Brad Smith has also promised Microsoft will boost its European data centers by 40% over the next two years.
Earlier in the day, Microsoft President Brad Smith said that Microsoft would sue for overturning any orders to stop operations in the EU. Donald Trump's trade policy has exacerbated tensions between the United States and the European Union.
"In the unlikely event, we have been ordered by any government anywhere in the world to suspend or stop cloud operations in Europe, and we promise that Microsoft will use all available legal avenues, including filing a lawsuit in court, to challenge such measures quickly and fiercely."
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Several of the world's largest tech companies, including Amazon, Yuan and Apple, have reported quarterly earnings this week, which will be how the industry navigates a bigger recession and Trump administration tariffs. Tesla, the world's most valuable automaker, also released the worst-than-expected earnings last week, indicating the company lost 71% of its profits, and rebounded against Elon Musk the previous year.
While other tech giants, such as Apple and Amazon, face serious financial risks associated with the Trump administration’s unstable tariff policies, Microsoft is already relatively insulated given its less reliance on trade.
Microsoft's stock has generally fallen about 7% since January, due in part to wider economic instability and the fact that Chinese-based developers have closed the AI gap. The release of the DeepSeek AI app in January (similar to Openai's Chatgpt) led to a rapid sell-off in Microsoft stock. Since then, Microsoft has integrated DeepSeek technology into some products.