Microsoft Q1 2025 earnings: focus on cloud and AI

When will Microsoft report its latest earnings?

Microsoft Corporation is scheduled to report its first quarter (Q1) earnings for 2025 on Wednesday, 31 October 2024 at 6.10am AEDT after the market closes.

The backdrop

Microsoft's fourth-quarter (Q4) results, released on 30 July, were met with a lukewarm reception as investors looked beyond a top and bottom line beat to focus on disappointing cloud results. Revenue from Azure and cloud services grew 29% during the quarter, missing a forecast of a 31% increase.

Given its intense competition with Amazon Web Services and Google for dominance in artificial intelligence (AI) workloads, Microsoft's cloud division is under the microscope. All three tech giants are investing substantially in enhancing AI capabilities.

Out of the 29% growth in Azure and other cloud services, AI services contributed 8 percentage points. Microsoft CFO Amy Hood highlighted that the demand for Azure AI services continues to exceed available capacity.

Summary of Microsoft's FY24 Q4 results

Within the details, Microsoft reported the following highlights:

• Revenue from Microsoft's Intelligent Cloud segment was $28.5 billion, up 19%. Within that, Server products and cloud services revenue increased by 21%, driven by Azure and other cloud services revenue growth of 29%
• Revenue in Productivity and Business Processes was $20.3 billion, up 11%. Within that, Office Commercial products and cloud services revenue increased by 12%, driven by Office 365 Commercial revenue growth of 13%
• Revenue in More Personal Computing was $15.9 billion, up 14%. Within that, Windows revenue increased by 7%, with Windows OEM revenue growth of 4% and Windows Commercial products and cloud services revenue growth of 11%.

Intelligent Cloud highlights

What to look for in Q1 2025

In its Q4 earnings call, Microsoft provided forward-looking guidance for Q1.

Microsoft's Q1 2025 outlook

There will be close attention paid to the following drivers:

• Cloud services growth: given the increasing emphasis on cloud computing, progress in Azure and cloud services is crucial. Investors should watch for growth rates and any updates on AI-driven contributions
• AI Development: as competition in AI intensifies, any advancements in Microsoft's AI capabilities, new partnerships, and projects will be closely watched as drivers of revenue growth
• Gaming and Xbox performance: with an increasing focus on gaming, particularly through Xbox, subscriber growth and game releases will be of interest
• Guidance and outlook: Microsoft's forward-looking statements and guidance will be scrutinised to assess management's expectations for future growth and any strategic shifts in response to market conditions.

Key financial summary

Wall Street's expectations for the upcoming results are as follows:

• Earnings per share (EPS): $3.11 vs $2.95 in Q4
• Revenue: $64.48 billion vs $64.73 billion in Q4

Microsoft's revenue

Microsoft technical analysis

After an approximate 25% gain in the first six months of 2024, the rally in Microsoft's share price has since stalled. This leaves the dominant features on the chart as uptrend support from the $219.35 low in January 2023, currently around $409.00–$408.00. The second notable feature is a possible head-and-shoulders topping pattern with the neckline around $385.00.

Microsoft weekly chart

What we can say is that while the share price of Microsoft remains above support at $409.00-$408.00, the uptrend remains in place, and with it, the possibility of a push towards the initial resistance $430.00-$440.00 area, with the potential to test Microsoft’s all-time high of $468.35.

Aware that if Microsoft’s share price were to break support at $409.00-$408.00 and then see a sustained break of the neckline (of the head-and-shoulders top) at around $385.00, it would then project a move lower towards the head-and-shoulders target of $310.00.

Microsoft daily chart