Microsoft Corporation (NASDAQ:MSFT) has gone almost nowhere over the past twelve months, with the stock up about 2% in that period. The stock ranks second on our list of the top 10 stocks Jim Cramer and billionaire Ken Fisher like. The company reports its fiscal 2027 first-quarter results on October 28, so can the stock gain in the coming weeks? Let’s analyze as the earnings date nears.
How Microsoft Makes Money From AI
Microsoft earns AI revenue in two main places. Microsoft 365 Copilot is an AI assistant inside Word, Excel, Outlook and Teams that companies pay for per employee. It passed 30 million paid seats in the fiscal fourth quarter. Azure, Microsoft’s cloud, rents computing power and AI models to businesses, and its revenue grew 43% in that quarter. Microsoft also holds a financial stake in OpenAI, whose products run on Azure first.
Microsoft sells new AI tools faster than most rivals because its software already runs inside almost every large company, so customers skip the long process of approving a new vendor. Its commercial backlog, which is signed business not yet delivered, rose 84%, or 25% without OpenAI. See whether the spending is paying off.
Will AI Agents Replace the Office Seat?
This is the biggest worry on the software side. Most of Microsoft’s revenue and profit still come from software sold per user. If AI agents do office work, companies need fewer employee seats, and Microsoft itself expects seat growth to slow over time. Microsoft has three answers. Companies need cloud computing to run AI agents, and Azure rents it out. Its customers’ work data already sits in Microsoft’s systems, which AI agents need to do useful work. Microsoft is also building its own AI models, expected by 2027, to cut what it pays outside AI providers when people use Copilot.
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Capacity, Chips and OpenAI
Capacity is the first open question. Bloomberg reported that Microsoft restricted new cloud subscriptions at key data center hubs in the US and Europe because it lacked capacity. Morgan Stanley estimates Microsoft added about 3.25 gigawatts of capacity in fiscal 2026 and expects about 4.25 gigawatts in fiscal 2027.
Chips are the second. Microsoft unveiled its Maia 300 AI chip this month and says it delivers 40% more output per megawatt than leading GPU-based systems. Production starts early next year. The chip could reduce Microsoft’s reliance on Nvidia, but earlier Maia versions shipped only in limited volumes.
OpenAI is the third. It makes up a large part of the backlog, which is why the 84% growth drops to 25% without it. A change in that relationship would hit Microsoft’s AI sales.
What Wall Street Wants to See on October 28
Microsoft has beaten earnings estimates in each of the last four quarters. The stock has rebounded in recent weeks, so Morgan Stanley says it faces a higher bar. The firm rates Microsoft Overweight and wants to see Azure growth in the mid-40s, better monetization of Microsoft 365 and Copilot, and disciplined operating expenses. The stock is up about 40% over the past six months, so investors expect a clean report. Check out the full analysis here.
Three Ways the Report Could Land
If Azure grows 44% to 45% or faster and Microsoft shows Copilot use deepening, the rally has support. If Azure lands on guidance but capital spending rises faster than cash flow and Microsoft gives no new Copilot data, the stock could stall, since expectations have moved up. If Azure growth falls short, capacity limits persist or OpenAI news hits the backlog, the AI-spending worry that sent shares down after the fiscal 2026 third-quarter report could return. Microsoft Corporation has beaten earnings estimates four quarters in a row, and the market will want to see a fifth.
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