Microsoft reports fiscal Q4 2026 earnings on July 29 after the close, with Wall Street expecting revenue of $87.7 billion (up 15% YoY) and adjusted EPS of $4.24. Investors are watching Azure growth guidance (consensus expects 39–40% constant-currency), but the headline-moving number is FY2027 capex: early reports peg guidance at $255–260 billion, a 35% increase from the $190 billion Microsoft has committed for calendar 2026.
Calendar 2026 capex of $190 billion (up 61% from 2025) has already pressured gross margins to 67.6%, their narrowest since 2022, driven by accelerated depreciation as AI infrastructure reaches amortization age. FY2027's projected $255–260 billion would signal that Microsoft expects compute scarcity and AI demand to persist at least through 2027, locking in multi-year capacity buildout well above historical levels.
Azure has posted 40% growth in constant-currency revenue; Microsoft's AI annualized run rate is $37 billion (up 123% YoY), and Copilot commercial seats exceed 20 million with 250% YoY growth. However, free cash flow compression and the disconnect between capex growth and near-term revenue acceleration remain investor concerns. At $397 ahead of earnings, MSFT trades 29% below its 52-week high but analyst consensus targets $556, suggesting upside if Azure sustains 40% and capex is framed as demand-driven rather than speculative.
For architects: FY2027 guidance at $255–260B vs. Meta's $125–145B (for calendar 2026) and Alphabet's raised guidance illuminates the hierarchy of AI compute confidence. If Microsoft's guidance confirms $255B+, expect renewed scrutiny on whether any cloud provider can credibly claim supply constraints prevent capacity sales to Anthropic, CoreWeave, or smaller AI labs.