Microsoft’s $281 Billion OpenAI Question Looms Over a Make-or-Break Earnings Report

When Microsoft reports fiscal third-quarter results after the US market close on Wednesday, the numbers will be only half the story. The real test lies in what management says about the company’s massive—and increasingly uncertain—relationship with OpenAI.

The software giant’s stock closed last week at €357.35, roughly 11 percent below where it started the year. That masks a volatile stretch: shares have rebounded more than 15 percent from the 52-week low of March 27, yet remain nearly 24 percent below the 2026 high of €467.45. The relative strength index sits at 28, deep in oversold territory, and the stock trades about 11 percent under its 200-day moving average.

The recovery is real but fragile. Wednesday’s report will determine whether it has staying power.

The Cloud Growth That Scares Everyone

Azure remains the single most important metric. In the prior quarter, Microsoft’s cloud platform grew 38 percent in constant currency—and management admitted that without capacity constraints, growth could have hit 40 percent or more. For the current period, the company guided for 37 to 38 percent. Bank of America estimates 37.5 percent, in line with consensus.

But here’s the tension: last quarter, Microsoft beat on both earnings per share and revenue, yet the stock fell nearly 10 percent the next day. The culprit was Azure growth of 39 percent—one percentage point lower than the prior quarter. That history has raised the bar considerably. Morgan Stanley, which maintains an “Overweight” rating and a $650 price target, wants to see Azure accelerate to 39 percent, a full point above the company’s own guidance ceiling.

The broader software sector is on edge. ServiceNow’s 18 percent plunge on Thursday after missing margin targets dragged the entire group lower, as investors fret about pricing power in the cloud amid the rise of new AI applications.

The $281 Billion OpenAI Conundrum

Microsoft’s reported backlog stands at $625 billion, a staggering figure that reflects customers waiting for server capacity. But 45 percent of that total—roughly $281 billion—comes from a single customer: OpenAI.

Should investors sell immediately? Or is it worth buying Microsoft?

That concentration is now a liability. The AI startup dramatically scaled back its long-term spending plans in February, slashing its projected compute outlay through 2030 from $1.4 trillion to just $600 billion. Morningstar plans to press management on the earnings call about how the remaining performance obligations are evolving.

The implication is clear: Microsoft will likely need to adjust that backlog downward when it reports. The question is by how much, and whether investors have already priced in the hit.

Copilot’s Quiet Progress

Beyond the cloud and OpenAI drama, Copilot monetization offers a more encouraging narrative. Microsoft sold 15 million enterprise licenses for the AI assistant by the end of December, representing roughly 4 percent penetration of the commercial Microsoft 365 base—but growth of 160 percent year-over-year. Bank of America sees further upside from new features like agent-based workflows.

On a trailing twelve-month earnings basis, Microsoft trades at a price-to-earnings ratio of roughly 26, well below its five-year average of about 33 and beneath the current Nasdaq-100 multiple. Morningstar assigns the stock five stars with a fair value of $600. TD Cowen and Baird recently trimmed their price targets to $540 and $500 respectively, but both maintain buy ratings.

Of the 49 analysts covering the stock, 41 recommend a strong buy. The consensus is optimistic, but the range of outcomes is unusually wide. A beat on Azure growth could send shares sharply higher; a miss—or a significant backlog writedown tied to OpenAI—could trigger another selloff.

Wednesday evening will settle the debate. For now, the market has already punished Microsoft. The question is whether that punishment was premature—or prescient.