MSFT’s tape into late October is shaped by three near-term catalysts: (1) the Q1 FY26 earnings print expected in late October, (2) the Windows 10 end-of-support (Oct 14, 2025) that may nudge a PC refresh tail, and (3) AI infrastructure headlines around OpenAI and custom silicon that investors are parsing for Azure demand implications. Underneath, Azure’s mid-to-high-30s growth and the Copilot monetization ramp remain the core pillars of the bull case.
What just changed
- Earnings set-up: Consensus focus for Q1 FY26 (Sep quarter) is Azure growth cadence, gross margin mix with AI workloads, and Copilot attach in Commercial. Any shift in AI capex guidance or comments on data-center supply chains will move the multiple.
- Windows 10 sunset (tomorrow): Support for Windows 10 ends October 14, 2025. That milestone typically prompts last-minute enterprise upgrades and device refreshes, benefiting Windows OEM, Commercial, and security/management SKUs. Expect management to frame the PC cycle as “gradual rather than spiky,” with Copilot+ PCs as the performance tier.
- OpenAI’s chip pivot chatter: OpenAI’s new plan to co-develop custom AI accelerators with Broadcom (initial rollouts in 2026) adds another thread to the AI-infra narrative. Near-term, it doesn’t displace Azure’s role powering OpenAI products, but it reinforces the industry trend toward diversified, multi-vendor compute. Microsoft and OpenAI also signed a fresh MOU in September to extend collaboration and safety commitments—investors will watch the earnings call for clarity on workload allocation and spend concentration.
- Cloud/regulatory drumbeat: In Europe and the U.K., cloud licensing and competition remain under scrutiny. Microsoft has taken incremental steps to address concerns; watch for commentary on customer wins in regions where licensing terms were adjusted and for any color on the cloud share landscape.
Fundamentals snapshot
- Last reported quarter (Q4 FY25, quarter ended June 30): Revenue $76.4B (+18%), operating income $34.3B (+23%), diluted EPS $3.65 (+24%).
- Intelligent Cloud: strong, with Azure +~39% driving the beat.
- More Personal Computing: returned to growth on better PC and Windows commercial mix, plus early Copilot for M365 traction.
- Capex/AI: management signaled sustained investment intensity (data centers, networking, custom silicon) to meet AI demand.
- Positioning into the print: Street models generally embed resilient Azure growth and steady Copilot adoption, offset by AI-driven capex and depreciation. Upside swing factors include higher Azure AI utilization, Copilot seat expansion, and improving GPU/ethernet availability; downside risks center on optimization headwinds, tougher compares, and any softness in ad/Xbox or PC units post-back-to-school.
Key watch items (next 2–6 weeks)
- Azure growth & margins: Utilization of AI clusters, training-to-inference mix, and any update on custom silicon/ethernet rollout versus InfiniBand.
- Copilot adoption metrics: Paid seat counts, SKU mix (E3 vs E5 vs add-ons), and customer ROI anecdotes.
- Windows 10 sunset read-through: OEM sell-in vs. sell-through, enterprise upgrade pipelines, and Copilot+ PC reception.
- AI capex & FCF bridge: FY26 capex cadence, data-center build timing, and depreciation tails.
- Regulatory developments: Any new steps from U.K./EU on cloud competition or licensing, and Microsoft’s responses.
Market context today
MSFT is trading around the $510–$520 zone intraday. The stock remains a liquid “AI quality” proxy; it typically reacts most to Azure growth deltas and capex/margin guide, with PC/Ads/Xbox acting as smaller needles unless there’s a surprise.
Bottom line
The investment setup is constructive but capex-intense. Azure’s momentum and Copilot’s early monetization offset regulatory noise and AI depreciation headwinds. Near term, the Windows 10 cutoff and the October earnings print are your primary catalysts; medium term, watch how Microsoft balances AI growth at scale with returns on infrastructure.
FAQ
When is the next earnings report?
Late October (after market). Watch for Q1 FY26 results covering the September quarter.
What’s the single biggest swing factor for MSFT?
Azure growth and gross margin—particularly AI utilization and cost curves—as even small percentage changes can move EPS and the multiple.
Will OpenAI’s custom chips hurt Azure?
Not near term. It underscores a multi-vendor future, but Azure remains central to OpenAI workloads and to enterprise AI more broadly. The key is utilization and service mix, not just who fabbed the chip.
How material is Windows 10 end-of-support?
It can pull forward upgrades and device buys, supporting Windows commercial and OEM lines. Expect a multi-quarter effect rather than a one-week spike.
What should I watch on Copilot?
Paid seat growth, attach to E5, and customer productivity data. The more Copilot ties into security, data governance, and developer workflows, the stickier (and pricier) the bundle.
Disclaimer
This article is for information purposes only and does not constitute investment advice or an offer to buy/sell any security. Investing involves risk, including loss of principal. Do your own research and consider consulting a licensed financial adviser. Figures, dates, and views reflect information available as of October 13, 2025 (Europe/Berlin) and may change without notice.
