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For the first quarter of fiscal 2027, Microsoft expects total company revenues between $89.85 billion and $90.95 billion, suggesting growth of roughly 16% to 17%.
The Zacks Consensus Estimate for revenues is pegged at $90.58 billion, indicating growth of 16.62% from the figure reported in the year-ago quarter.
Operating margin is expected to have remained relatively flat year over year, as cost of revenues is projected to have increased 23-24% to $29.6-$29.8 billion, while operating expenses are anticipated to have grown 7-8% to $16.8-$16.9 billion.
The consensus mark for earnings has moved north by a penny to $4.71 per share over the past 30 days. The figure suggests 14.04% growth year over year.
Image Source: Zacks Investment Research
MSFT Earnings Surprise History
In the last reported quarter, the company delivered an earnings surprise of 12.59%. The company’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 9.34%.
Our proven model predicts 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. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Intelligent Cloud is likely to have led growth, with revenues projected at $40.95-$41.25 billion, up 33-34%. Azure growth is expected to have accelerated to roughly 45% at constant currency, aided by fleet efficiency gains. On July 21, Microsoft expanded its partnership with Mistral to bring its models to Microsoft Sovereign Cloud. In August, it launched the India South Central cloud region in Hyderabad and confirmed that its Saudi Arabia East region will open in November. However, demand continued to exceed capacity, while on-premises server revenues are expected to have declined in the low-to-mid single digits.
Productivity and Business Processes revenues are projected at $36.7-$37 billion, up 11-12%. Microsoft 365 Commercial cloud is expected to have grown about 16% at constant currency on an adjusted basis, aided by Copilot, E5 and E7 adoption and usage-based billing for Cowork introduced in July. In September, Microsoft unveiled the new Copilot app featuring Home, Code and Autopilot. Dynamics 365 and LinkedIn are expected to have grown in the low-teens and high-single digits, respectively, while Microsoft 365 Consumer cloud growth is likely to have moderated to mid-teens, lapping last year’s price increase.
More Personal Computing remains the weak spot, with revenues projected at $12.2-$12.7 billion. Windows OEM and Devices revenues are expected to have declined in the low twenties amid higher component costs and elevated inventory, although Windows 11 version 26H2 became generally available in September. Xbox content and services revenues are likely to have declined in the mid-single digits, while hardware is likely to have been hurt by console price hikes effective Aug. 1. Search advertising revenues ex-TAC are expected to have grown in the mid-single digits.
According to IDC results, third-quarter 2026 worldwide PC shipments reached 62.7 million units, down 20.1% year over year, the second consecutive decline and a deeper one than the 3.8% drop in the second quarter. Continued supply constraints and the inventory pull-in earlier in the year, as vendors and channels rushed to stock up ahead of memory-driven price hikes, left the quarter with little demand to draw on.
Lenovo (LNVGY - Free Report) , Dell Technologies (DELL - Free Report) and HP Inc. (HPQ - Free Report) witnessed shipment declines of 22.6%, 25% and 30.9%, respectively, year over year.
Capital expenditure remains the biggest overhang. Microsoft has projected fiscal first-quarter capex of more than $50 billion, including the lease reclassification impact from extending datacenter useful lives to 25 years. Higher component pricing, finance lease-related interest expense, with other income projected at roughly negative $100 million, and OpenAI-related bookings volatility are expected to have weighed. Nonetheless, Microsoft Cloud gross margin is expected to have remained stable sequentially.
MSFT Price Performance & Stock Valuation
Shares of MSFT have returned 23.5% in the past six-month period against the broader Zacks Computer & Technology sector’s growth of 4.5%. Shares of DELL, HPQ and LNVGY have gained 114.8%, 72.8% and 88.5%, respectively, in the same time frame.
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 9.42X compared with the Zacks Computer - Software industry’s 6.27X, reflecting a stretched valuation. Microsoft carries a Value Score of D.
MSFT’s P/S F12M Ratio Depicts Stretched Valuation
Image Source: Zacks Investment Research
Investment Thesis
Microsoft enters first-quarter fiscal 2027 with strong cloud momentum, as Azure growth is expected to have accelerated to roughly 45% and Copilot, E5 and E7 adoption supports Microsoft 365 Commercial cloud. However, capex above $50 billion, higher component costs and capacity constraints pressure margins. More Personal Computing faces deeper weakness, as IDC reported third-quarter 2026 PC shipments fell 20.1% year over year to 62.7 million units, with Lenovo, Dell and HP posting steep declines amid supply constraints and earlier inventory pull-ins. Stiff cloud competition and a premium valuation further limit upside, suggesting investors should wait for a better entry point.
Conclusion
Microsoft’s accelerating Azure growth, expanding Copilot adoption and broad cloud demand support its long-term prospects. However, heavy capex, rising component costs, capacity constraints and a sharp PC market decline are expected to weigh on first-quarter fiscal 2027 results. Given stiff cloud competition and a premium valuation, existing investors should hold the stock or wait for a better entry point.
View the Zacks #1 Rank List
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Microsoft Stock Before Q1 Earnings: Buy Now or Wait for Results?
Key Takeaways
Microsoft (MSFT - Free Report) is slated to report first-quarter fiscal 2027 results on Oct. 28.
For the first quarter of fiscal 2027, Microsoft expects total company revenues between $89.85 billion and $90.95 billion, suggesting growth of roughly 16% to 17%.
The Zacks Consensus Estimate for revenues is pegged at $90.58 billion, indicating growth of 16.62% from the figure reported in the year-ago quarter.
Operating margin is expected to have remained relatively flat year over year, as cost of revenues is projected to have increased 23-24% to $29.6-$29.8 billion, while operating expenses are anticipated to have grown 7-8% to $16.8-$16.9 billion.
The consensus mark for earnings has moved north by a penny to $4.71 per share over the past 30 days. The figure suggests 14.04% growth year over year.
Image Source: Zacks Investment Research
MSFT Earnings Surprise History
In the last reported quarter, the company delivered an earnings surprise of 12.59%. The company’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 9.34%.
Microsoft Corporation Price and EPS Surprise
Microsoft Corporation price-eps-surprise | Microsoft Corporation Quote
Earnings Whispers for MSFT
Our proven model predicts 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. 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 +0.26% and a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors Shaping MSFT’s Upcoming Q1 Results
Intelligent Cloud is likely to have led growth, with revenues projected at $40.95-$41.25 billion, up 33-34%. Azure growth is expected to have accelerated to roughly 45% at constant currency, aided by fleet efficiency gains. On July 21, Microsoft expanded its partnership with Mistral to bring its models to Microsoft Sovereign Cloud. In August, it launched the India South Central cloud region in Hyderabad and confirmed that its Saudi Arabia East region will open in November. However, demand continued to exceed capacity, while on-premises server revenues are expected to have declined in the low-to-mid single digits.
Productivity and Business Processes revenues are projected at $36.7-$37 billion, up 11-12%. Microsoft 365 Commercial cloud is expected to have grown about 16% at constant currency on an adjusted basis, aided by Copilot, E5 and E7 adoption and usage-based billing for Cowork introduced in July. In September, Microsoft unveiled the new Copilot app featuring Home, Code and Autopilot. Dynamics 365 and LinkedIn are expected to have grown in the low-teens and high-single digits, respectively, while Microsoft 365 Consumer cloud growth is likely to have moderated to mid-teens, lapping last year’s price increase.
More Personal Computing remains the weak spot, with revenues projected at $12.2-$12.7 billion. Windows OEM and Devices revenues are expected to have declined in the low twenties amid higher component costs and elevated inventory, although Windows 11 version 26H2 became generally available in September. Xbox content and services revenues are likely to have declined in the mid-single digits, while hardware is likely to have been hurt by console price hikes effective Aug. 1. Search advertising revenues ex-TAC are expected to have grown in the mid-single digits.
According to IDC results, third-quarter 2026 worldwide PC shipments reached 62.7 million units, down 20.1% year over year, the second consecutive decline and a deeper one than the 3.8% drop in the second quarter. Continued supply constraints and the inventory pull-in earlier in the year, as vendors and channels rushed to stock up ahead of memory-driven price hikes, left the quarter with little demand to draw on.
Lenovo (LNVGY - Free Report) , Dell Technologies (DELL - Free Report) and HP Inc. (HPQ - Free Report) witnessed shipment declines of 22.6%, 25% and 30.9%, respectively, year over year.
Capital expenditure remains the biggest overhang. Microsoft has projected fiscal first-quarter capex of more than $50 billion, including the lease reclassification impact from extending datacenter useful lives to 25 years. Higher component pricing, finance lease-related interest expense, with other income projected at roughly negative $100 million, and OpenAI-related bookings volatility are expected to have weighed. Nonetheless, Microsoft Cloud gross margin is expected to have remained stable sequentially.
MSFT Price Performance & Stock Valuation
Shares of MSFT have returned 23.5% in the past six-month period against the broader Zacks Computer & Technology sector’s growth of 4.5%. Shares of DELL, HPQ and LNVGY have gained 114.8%, 72.8% and 88.5%, respectively, in the same time frame.
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 9.42X compared with the Zacks Computer - Software industry’s 6.27X, reflecting a stretched valuation. Microsoft carries a Value Score of D.
MSFT’s P/S F12M Ratio Depicts Stretched Valuation
Image Source: Zacks Investment Research
Investment Thesis
Microsoft enters first-quarter fiscal 2027 with strong cloud momentum, as Azure growth is expected to have accelerated to roughly 45% and Copilot, E5 and E7 adoption supports Microsoft 365 Commercial cloud. However, capex above $50 billion, higher component costs and capacity constraints pressure margins. More Personal Computing faces deeper weakness, as IDC reported third-quarter 2026 PC shipments fell 20.1% year over year to 62.7 million units, with Lenovo, Dell and HP posting steep declines amid supply constraints and earlier inventory pull-ins. Stiff cloud competition and a premium valuation further limit upside, suggesting investors should wait for a better entry point.
Conclusion
Microsoft’s accelerating Azure growth, expanding Copilot adoption and broad cloud demand support its long-term prospects. However, heavy capex, rising component costs, capacity constraints and a sharp PC market decline are expected to weigh on first-quarter fiscal 2027 results. Given stiff cloud competition and a premium valuation, existing investors should hold the stock or wait for a better entry point.