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For the third quarter of fiscal 2026, the company expects total revenues between $80.65 billion and $81.75 billion, suggesting growth of approximately 15% to 17%. The Zacks Consensus Estimate for revenues is pegged at $81.4 billion, indicating growth of 16.17% from the figure reported in the year-ago quarter.
Capital expenditures are expected to have declined sequentially, though management indicated demand continued to exceed supply across AI services.
The consensus mark for earnings has remained steady at $4.07 per share over the past 30 days, suggesting 17.63% year-over-year growth.
Image Source: Zacks Investment Research
MSFT Earnings Surprise History
In the last reported quarter, the company delivered an earnings surprise of 6.7%. The company’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 9.24%.
Earnings Whispers for MSFT
Our proven model does not conclusively predict an earnings beat for Microsoft this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Microsoft's fiscal third-quarter 2026 results are likely to reflect accelerating commercial AI monetization and continued data center expansion, balanced against pressure on consumer-facing businesses, during the January–March 2026 period.
Microsoft projected revenues between $34.25 billion and $34.55 billion for Productivity and Business Processes, suggesting growth of roughly 14%, with the Zacks Consensus Estimate indicating 15.2% year-over-year growth to $34.4 billion.
The March 9, 2026, unveiling of Microsoft 365 Copilot Wave 3 marked a major expansion of the company's enterprise AI offering, enabling users to build agents directly within Word, Excel, PowerPoint and Outlook. Microsoft also announced Microsoft 365 E7: The Frontier Suite at $99 per user monthly, unifying E5, Copilot, Agent 365 and Entra Suite ahead of its May 1, 2026, general availability. The introduction of Copilot Cowork, developed with Anthropic, alongside the integration of Claude models into Copilot Chat, expanded Microsoft's multi-model approach. LinkedIn revenues are expected to grow approximately 10%, while Dynamics 365 revenues are projected to increase in the mid to high teens.
The Intelligent Cloud segment is likely to have remained capacity-constrained through the quarter. Management projected revenues between $34.1 billion and $34.4 billion, with Azure revenue growth guided to 37% to 38% in constant currency (cc). The consensus mark for this segment is pegged at $34.2 billion, indicating growth of 28.1% from the figure reported in the year-ago quarter.
In the quarter under review, the unveiling of Maia 200, Microsoft's second-generation custom AI inference accelerator built on TSMC's 3nm process, marked progress toward improving AI token economics, with the chip already running OpenAI's GPT-5.2 models and Microsoft 365 Copilot workloads at the company's U.S. Central data center. The joint statement with OpenAI reaffirmed Azure's exclusive position as the cloud provider for stateless APIs. Capacity expansion continued aggressively, with Microsoft agreeing to lease the roughly 700-megawatt Crusoe-developed data center campus in Abilene, TX. The opening of the Denmark East cloud region in March and a January partnership with grid operator MISO further expanded the footprint. For the on-premises server business, revenues are expected to decline in the low to mid-single digits.
Microsoft projected More Personal Computing revenues between $12.3 billion and $12.8 billion, with the Zacks Consensus Estimate indicating a 5.8% year-over-year decline to $12.5 billion.
According to preliminary IDC results, first-quarter 2026 worldwide PC shipments reached 65.6 million units, up 2.5% year over year — a significant deceleration from the 9.6% growth posted in fourth-quarter 2025. Lenovo (LNVGY - Free Report) maintained its lead, with shipment growth of 8.6% year over year. Dell Technologies (DELL - Free Report) rose 7.7%, while HP Inc. (HPQ - Free Report) declined 4.9%.
Windows OEM and Devices revenues are likely to have declined in the low to mid-single digits. Xbox content and services revenues are expected to have declined in the low to mid-single digits, though Xbox Cloud Gaming exited beta in February with 1440p streaming, and Project Helix, unveiled at GDC, outlined Microsoft's next-generation roadmap. Search and news advertising ex-TAC revenues are likely to have grown in the high single to low double digits.
Operating margins are expected to be down slightly year over year on continued AI infrastructure investment.
MSFT Price Performance & Stock Valuation
Shares of MSFT have lost 22.4% in the past six-month period against the broader Zacks Computer & Technology sector’s growth of 5.4%. Shares of DELL and LNVGY have gained 33.2% and 1.8%, HPQ has lost 29.1%, respectively.
6-Month Performance
Image Source: Zacks Investment Research
Now, let’s look at the value Microsoft offers investors at current levels. MSFT is trading at a premium with a forward 12-month P/S of 8.61X compared with the Zacks Computer - Software industry’s 7.16X, reflecting a stretched valuation.
MSFT’s P/S F12M Ratio Depicts Stretched Valuation
Image Source: Zacks Investment Research
Investment Thesis
Microsoft's compelling AI flywheel makes a strong case for existing shareholders to hold ahead of third-quarter fiscal 2026 results. The Wave 3 Copilot rollout, the E7 Frontier Suite launch, deepened Anthropic integration and the Maia 200 deployment position the company to monetize agentic AI at scale, while the reaffirmed OpenAI partnership and aggressive Azure capacity expansion underpin durable cloud growth. The $625 billion RPO backlog provides exceptional revenue visibility. However, premium valuation, intensifying competition from Salesforce, Amazon and Google, persistent capacity constraints and heavy AI infrastructure capex pressuring margins suggest new investors await a better entry point post-earnings.
Conclusion
Microsoft enters its third-quarter fiscal 2026 print with strong AI momentum from Wave 3 Copilot, the E7 Frontier Suite and Maia 200, balanced by margin pressure from heavy AI capex, capacity constraints and consumer softness. Existing shareholders should hold given the $625 billion RPO backlog, while prospective investors may await a better entry point post-earnings amid premium valuation.
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Should You Buy, Sell or Hold Microsoft Stock Before Q3 Earnings?
Key Takeaways
Microsoft (MSFT - Free Report) is slated to report third-quarter fiscal 2026 results on April 29.
For the third quarter of fiscal 2026, the company expects total revenues between $80.65 billion and $81.75 billion, suggesting growth of approximately 15% to 17%. The Zacks Consensus Estimate for revenues is pegged at $81.4 billion, indicating growth of 16.17% from the figure reported in the year-ago quarter.
Capital expenditures are expected to have declined sequentially, though management indicated demand continued to exceed supply across AI services.
The consensus mark for earnings has remained steady at $4.07 per share over the past 30 days, suggesting 17.63% year-over-year growth.
Image Source: Zacks Investment Research
MSFT Earnings Surprise History
In the last reported quarter, the company delivered an earnings surprise of 6.7%. The company’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 9.24%.
Earnings Whispers for MSFT
Our proven model does not conclusively predict an earnings beat for Microsoft this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
MSFT has an Earnings ESP of 0.00% and a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Microsoft Corporation Price and Consensus
Microsoft Corporation price-consensus-chart | Microsoft Corporation Quote
Factors Shaping MSFT’s Upcoming Q3 Results
Microsoft's fiscal third-quarter 2026 results are likely to reflect accelerating commercial AI monetization and continued data center expansion, balanced against pressure on consumer-facing businesses, during the January–March 2026 period.
Microsoft projected revenues between $34.25 billion and $34.55 billion for Productivity and Business Processes, suggesting growth of roughly 14%, with the Zacks Consensus Estimate indicating 15.2% year-over-year growth to $34.4 billion.
The March 9, 2026, unveiling of Microsoft 365 Copilot Wave 3 marked a major expansion of the company's enterprise AI offering, enabling users to build agents directly within Word, Excel, PowerPoint and Outlook. Microsoft also announced Microsoft 365 E7: The Frontier Suite at $99 per user monthly, unifying E5, Copilot, Agent 365 and Entra Suite ahead of its May 1, 2026, general availability. The introduction of Copilot Cowork, developed with Anthropic, alongside the integration of Claude models into Copilot Chat, expanded Microsoft's multi-model approach. LinkedIn revenues are expected to grow approximately 10%, while Dynamics 365 revenues are projected to increase in the mid to high teens.
The Intelligent Cloud segment is likely to have remained capacity-constrained through the quarter. Management projected revenues between $34.1 billion and $34.4 billion, with Azure revenue growth guided to 37% to 38% in constant currency (cc). The consensus mark for this segment is pegged at $34.2 billion, indicating growth of 28.1% from the figure reported in the year-ago quarter.
In the quarter under review, the unveiling of Maia 200, Microsoft's second-generation custom AI inference accelerator built on TSMC's 3nm process, marked progress toward improving AI token economics, with the chip already running OpenAI's GPT-5.2 models and Microsoft 365 Copilot workloads at the company's U.S. Central data center. The joint statement with OpenAI reaffirmed Azure's exclusive position as the cloud provider for stateless APIs. Capacity expansion continued aggressively, with Microsoft agreeing to lease the roughly 700-megawatt Crusoe-developed data center campus in Abilene, TX. The opening of the Denmark East cloud region in March and a January partnership with grid operator MISO further expanded the footprint. For the on-premises server business, revenues are expected to decline in the low to mid-single digits.
Microsoft projected More Personal Computing revenues between $12.3 billion and $12.8 billion, with the Zacks Consensus Estimate indicating a 5.8% year-over-year decline to $12.5 billion.
According to preliminary IDC results, first-quarter 2026 worldwide PC shipments reached 65.6 million units, up 2.5% year over year — a significant deceleration from the 9.6% growth posted in fourth-quarter 2025. Lenovo (LNVGY - Free Report) maintained its lead, with shipment growth of 8.6% year over year. Dell Technologies (DELL - Free Report) rose 7.7%, while HP Inc. (HPQ - Free Report) declined 4.9%.
Windows OEM and Devices revenues are likely to have declined in the low to mid-single digits. Xbox content and services revenues are expected to have declined in the low to mid-single digits, though Xbox Cloud Gaming exited beta in February with 1440p streaming, and Project Helix, unveiled at GDC, outlined Microsoft's next-generation roadmap. Search and news advertising ex-TAC revenues are likely to have grown in the high single to low double digits.
Operating margins are expected to be down slightly year over year on continued AI infrastructure investment.
MSFT Price Performance & Stock Valuation
Shares of MSFT have lost 22.4% in the past six-month period against the broader Zacks Computer & Technology sector’s growth of 5.4%. Shares of DELL and LNVGY have gained 33.2% and 1.8%, HPQ has lost 29.1%, respectively.
6-Month Performance
Image Source: Zacks Investment Research
Now, let’s look at the value Microsoft offers investors at current levels. MSFT is trading at a premium with a forward 12-month P/S of 8.61X compared with the Zacks Computer - Software industry’s 7.16X, reflecting a stretched valuation.
MSFT’s P/S F12M Ratio Depicts Stretched Valuation
Image Source: Zacks Investment Research
Investment Thesis
Microsoft's compelling AI flywheel makes a strong case for existing shareholders to hold ahead of third-quarter fiscal 2026 results. The Wave 3 Copilot rollout, the E7 Frontier Suite launch, deepened Anthropic integration and the Maia 200 deployment position the company to monetize agentic AI at scale, while the reaffirmed OpenAI partnership and aggressive Azure capacity expansion underpin durable cloud growth. The $625 billion RPO backlog provides exceptional revenue visibility. However, premium valuation, intensifying competition from Salesforce, Amazon and Google, persistent capacity constraints and heavy AI infrastructure capex pressuring margins suggest new investors await a better entry point post-earnings.
Conclusion
Microsoft enters its third-quarter fiscal 2026 print with strong AI momentum from Wave 3 Copilot, the E7 Frontier Suite and Maia 200, balanced by margin pressure from heavy AI capex, capacity constraints and consumer softness. Existing shareholders should hold given the $625 billion RPO backlog, while prospective investors may await a better entry point post-earnings amid premium valuation.