Microsoft Earnings Preview: Considerations for Traders & Investors

The stock price is near all-time highs, and the software-oriented company could sidestep tariffs

• Microsoft is scheduled to report quarterly earnings after the market closes tomorrow.
• The company is expected to announce earnings-per-share of $3.38 on $25.27 billion in revenue.
• Its stock is near all-time highs, quickly approaching a $4 trillion valuation if the rally continues.
• But the company will need to lay out a continued AI revenue plan if the market is to continue investing in a big way.

Microsoft (MSFT) could become the second company in history to reach a $4 trillion valuation, a feat NVIDIA (NVDA) achieved July 9. Whether MSFT reaches that pinnacle may depend partly on what management says during the Q2 earnings call scheduled for after the market closes tomorrow. But the numbers are looking good

Microsoft’s stock is up over 20% in 2025, but more impressively it’s up almost 50% from the tariff lows in April. It currently sits just off of all-time-highs of around $513 per share. The company is expected to announce earnings-per-share (EPS) of $3.38 on $25.27 billion in revenue for the quarter.

It's possible Microsoft may steer clear of major tariff implications because the business model is software-centric as opposed to physical hardware. This alleviates import and export worries for the most part and could be a driving factor in the historic rally the company has seen since the last earnings call, recently breaching $500 per share.

Satya Nadella, CEO of Microsoft, offered positive sentiment in the last earnings call: “Cloud and AI are the essential inputs for every business to expand output, reduce costs and accelerate growth ... from AI infra and platforms to apps, we are innovating across the stack to deliver for our customers.”

Amy Hood, CFO of Microsoft, echoed the sentiment: “We delivered a strong quarter with Microsoft Cloud revenue of $42.4 billion, up 20% (up 22% in constant currency) year-over-year driven by continued demand for our differentiated offerings.”

Expected figures were crushed in the last earnings call, and investors are expecting more of the same this time around:

• Revenue was $70.1 billion and increased 13% (up 15% in constant currency).
• Operating income was $32.0 billion and increased 16% (up 19% in constant currency).
• Net income was $25.8 billion and increased 18% (up 19% in constant currency).
• Diluted earnings per share was $3.46 and increased 18% (up 19% in constant currency).

While these figures are impressive, they put a ton of pressure on executives to deliver even stronger numbers and offer an enticing plan for the rest of the fiscal year.

Looking at the implied volatility of Microsoft stock can help us put context around the market's expected range for the stock price for tomorrow’s earnings call. As it stands, MSFT stock has a +/- $19.73 expected stock price range for this week. This is a very low percentage of the stock's notional value, at just 3.7%. Most companies land in the 5% to 10% range for earnings, which may tell us that the move we've seen over the past few weeks could be pricing in the expected results from earnings.

Still, we're seeing a +/- $38.61 implied stock price range for the October options cycle, which is 80 days away. Over half of October's implied range is priced into this earnings call this week, so there's still plenty of implied volatility for earnings relative to the next few months.

Bullish on Microsoft earnings

If you're bullish on MSFT stock for earnings, it seems you'll need to see very strong numbers from an EPS and revenue perspective, and a solid plan for the rest of the year for the hype train to continue. The stock has already seen a massive rally from lows, and that just adds pressure for the tech giant to deliver.

Bearish on Microsoft earnings

If you're bearish on Microsoft stock for earnings, you may just need a slight slowdown in guidance, or any sort of EPS or revenue miss. With the recent stock performance, the slightest slowdown could result in a big sell-off, with investors taking profits and adding pressure to the downside if orders to sell the stock significantly outweigh orders to purchase it.

Either way you see it, tune in to Options Trading Concepts Live on Wednesday at 11 a.m. CDT for an in-depth look at earnings strategies for Microsoft and the rest of the Magnificent Seven stocks reporting this week.

Mike Butler, tastylive director of market intelligence, has been trading the markets for a decade. He appears on Options Trading Concepts Live, Monday-Friday. @tradermikeyb

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