Financial Report Outlook | Leading Q3 Performance, Can Microsoft Corporation (MSFT.US) Add Fuel to the Rebound of US Stocks?

The Microsoft Corporation (MSFT.US) will release its third-quarter financial report for the 2025 fiscal year after trading hours on Wednesday. Analysts are generally optimistic about this tech giant. According to the Visible Alpha survey, analysts on average expect Microsoft Corporation's third-quarter revenue to reach $68.44 billion, an increase of over 10% compared to the previous year; net profit is expected to be $23.94 billion, with earnings per share of $3.21, higher than the previous year's $21.94 billion ($2.94 per share). Revenue for Microsoft Corporation's Intelligent Cloud business segment (including Azure cloud computing platform) is expected to surge by 18% to $26.13 billion. Large institutions have been bullish before the result announcement According to Visible Alpha statistics, all 20 analysts tracking Microsoft Corporation stock have given it a "buy" or equivalent rating. Although Microsoft Corporation's stock has dropped by 7% in 2025, analysts' average target price is slightly above $492, representing over a 25% increase from the closing price of $391.85 on the previous Friday. As of April 23, 2025, according to TipRanks' Smart Score system, Microsoft Corporation has received a "Outperform" rating with a score of 9. Analysts rate it as a "Buy", with 32 analysts recommending buying, 4 giving a "Neutral" rating, and no "Sell" recommendations. Analysts at Wedbush recently lowered their price target for Microsoft Corporation from $550 to $475 due to concerns about the tariffs imposed by President Trump. However, they still express a positive long-term outlook for Microsoft Corporation, primarily due to its potential in the field of artificial intelligence. The analysts stated, "We are increasingly confident that the monetization opportunities brought about by deploying artificial intelligence in the field of cloud computing will revolutionize the entire industry, and Microsoft Corporation will continue to dominate the market." Analysts at Goldman Sachs Group, Inc. also maintain a "Buy" rating for Microsoft Corporation stock, but lowered their target price from $500 to $450. They believe that the current economic environment has "many uncertainties", but Microsoft Corporation has an advantage in seizing opportunities in artificial intelligence. Morningstar analysts point out that compared to many other tech companies, Microsoft Corporation has significant advantages because of its "minimal exposure to risks in retail, advertising spending, cyclical hardware, and physical supply chain." Focus of Q3 earnings report Against the backdrop of market uncertainty, investors will closely watch the performance of its cloud services, investments in artificial intelligence, and performance outlook. Previously, disappointing cloud business performance and weak performance guidance from Microsoft Corporation led to consecutive declines in stock price after the financial report release. The company's Intelligent Cloud business sector, including Azure, saw a 19% revenue growth to $25.54 billion, below the market's expectation of $25.83 billion. Microsoft Corporation's cloud business sector is under close scrutiny due to fierce competition in the field of artificial intelligence with Amazon.com, Inc.'s Web Services (AWS) and Alphabet Inc. Class C. These three tech giants are all investing heavily to enhance their artificial intelligence capabilities. Satya Nadella, Chairman and CEO of Microsoft Corporation, stated, "Currently, our annualized revenue from our artificial intelligence business has surpassed $13 billion, a year-over-year growth of 175%." During the second-quarter earnings conference call, Microsoft Corporation gave revenue guidance for the third quarter of $67 billion to $68.7 billion, below the market's general expectation of $69.78 billion. The following aspects will be the focus: Cloud service growth: Analysts expect Azure to maintain strong growth, with a growth rate of around 30%, and investors will focus on whether it can surpass competitors such as Amazon.com, Inc.'s Web Services and Alphabet Inc. Class C Cloud. Investments and developments in artificial intelligence: Microsoft Corporation has made significant investments in the field of artificial intelligence, including tools such as Microsoft 365 Copilot and Azure OpenAI Service. Investors hope to see these investments substantial revenue. Performance of the gaming and Xbox business: With increasing attention on the gaming business, especially Xbox, user growth and the release of new games will be closely watched. Performance guidance and outlook: The market will carefully examine Microsoft Corporation's forward-looking statements and performance guidance to evaluate management's expectations for future growth, as well as whether the company has strategic adjustments to address changes in the competitive landscape and macroeconomic challenges. Impact of tariffs on Microsoft Corporation? Compared to other large tech companies, Microsoft Corporation is relatively less affected by tariffs, but it is not completely immune to their impact. Microsoft Corporation's core revenue comes from enterprise software and cloud services, such as Azure, Microsoft 365, DYNAMJapan imports 365 billion USD worth of software and cloud services, accounting for approximately 74.4% of its net sales. Unlike physical goods, software and cloud services, as intangible products, are not directly affected by import tariffs.However, the greater risk facing Microsoft Corporation is that tariffs and trade policies may lead to a broader economic downturn, with JPMorgan forecasting a 60% probability of a global economic recession. If Microsoft Corporation's corporate clients face profit pressures or budget cuts, they may delay or reduce their spending on cloud services and software subscriptions, indirectly impacting Microsoft Corporation's revenue. Additionally, retaliatory tariff policies that may be implemented by the EU and other countries or regions could target Microsoft Corporation's services, especially considering the EU's past fines on US tech companies.