Microsoft (MSFT) Q4 FY2026 Earnings Preview: $87.7B Revenue, Azure 40%, FY2027 Capex $255-260B

TradingKey - On Tuesday July 29, Microsoft (NASDAQ: MSFT) shares closed at $397.24, having gained ground following Monday’s sell-off in semiconductor names. With Q4 FY2026 earnings dropping after close tonight and a conference call scheduled for 5:30 PM ET, let’s consider what the business looked like in Q3 and what we should be watching tonight.

Consensus estimates are calling for revenue of $87.67 billion, growing 15% YoY, with an EPS of $4.24. The most precise watch item since Q3 had already shown 40% is Azure guidance of 39% to 40% constant currency growth in Q4. The major new data point is FY2027 capex guidance of $255 billion to $260 billion, which is significantly higher than the $190 billion already committed in 2026. 

What the Business Looked Like in Q3 - The Baseline Tonight Must Extend

In Q3 FY2026, reported back in April, the company posted revenue of $82.9 billion, growing 18% YoY; operating income of $38.4 billion, growing 20%; and EPS of $4.27, beating consensus of $4.13. Azure saw 40% growth in Q3, marking its fastest pace in over a year, with AI services accounting for roughly 16 pp of growth. Microsoft Cloud revenue hit $54.5 billion, up 29%. 

The AI annual revenue run-rate has grown 123% YoY to $37 billion, capturing Azure AI workloads, Copilot seats across Microsoft 365 and GitHub, and enterprise AI applications. Remaining performance obligations were at $627 billion, up 99% YoY, driven by the weight of multi-year contracts, including those linked to OpenAI.

With consensus revenue of $87.67 billion for Q4, we are looking at sequential growth of $4.77 billion from Q3’s $82.9 billion. Management guided Azure growth at 39% to 40% in constant currency for Q4, which aligns with Q3’s 40%. Assuming Azure remains steady at 40% and the AI run-rate maintains its trajectory, a revenue beat becomes fairly easy. 

The EPS of $4.24 is actually below Q3’s $4.27, driven by the accounting treatment of accelerated depreciation as newly installed AI infrastructure assets enter the amortisation phase. Higher depreciation is the direct result of spending $190 billion a year on data centres and equipment.

The FY2027 Capex Number Is the Real Story Tonight

This brings us to the FY2027 capex number, which is the most important piece of information heading into tonight’s call. As reported by ProActive Investors on July 27, FY2027 capex guidance stands at $255 billion to $260 billion. On the call, if management confirms this guidance, we will be looking at a 35% increase compared to the $190 billion spent in calendar 2026. Take a look at the Alphabet template from July 22. When Alphabet raised FY2026 capex guidance from $180 billion to $195 billion, and then to $205 billion, the stock fell 15% in two days despite record revenue and Cloud growth. The question for Microsoft is whether tonight’s call frames $255 to $260 billion in FY2027 capex as evidence of accelerating customer demand, representing the bull case, or as infrastructure spending outpacing monetisation, representing the bear case according to Moody’s.

On Monday, Microsoft also announced Project Perception, its first custom AI cybersecurity system to defend against AI-driven cyber threats. This means that Azure is providing new AI security products that will require the infrastructure Microsoft is constructing.

Every enterprise AI product that Microsoft can highlight in this report, including cybersecurity, Copilot seats, GitHub Copilot, and Dynamics 365 AI, provides additional justification for the FY2027 capex estimate of $255B to $260B, making it a more demand-based capex program instead of a guess. Tonight’s earnings call, specifically CFO Amy Hood’s words, will reveal whether this capex is pulling in revenue or leading the way.

MSFT Technical Setup

On the daily chart, MSFT is trading sideways at $397.24, below the 50-day EMA at $394.50, and the RSI has recovered to 52 above the neutral 50 level.

Microsoft (MSFT) Price Chart - Source: Tradingview

The trendline connecting April lows continues to hold the $376.90 support. A move above $394.50 tonight clears the way to $407.90, then $421.70. The 200-day EMA rests near $422. The support below $393.30 begins at $376.90. The next supports below $376.90 are $366.85 and $356.40.

Key Levels for Tonight

• Current price:  $397.24. Range today $391.30 to $400.32. 52-week range: $349.20 to $555.45
• Q4 consensus:  $87.67B revenue (+15% YoY). EPS $4.24. Azure guided 39-40%
• Q3 baseline:  Revenue $82.9B (+18%). Azure +40%. AI run-rate $37B (+123%). Copilot 20M+ seats
• FY2027 capex:  Disclosed at $255-260B (vs $190B for 2026, +35% increase). Confirms with call tonight
• New product:  Project Perception AI cybersecurity system unveiled Monday
• Analyst target:  Average $557.25 (56 analysts, Strong Buy). 40%+ upside from $397
• Resistance:  $394.50 (50-day EMA), $407.90, $421.70, $422 (200-day EMA)
• Support:  $393.30, $376.90, $366.85

Why Is Azure the Most Important Number in Microsoft's Earnings?

Azure is Microsoft's fastest-growing major business and is the main reason why the company is investing $190 billion in 2026 capex and projecting $255 to $260 billion in FY2027 capex. In Q3, Azure grew 40% and AI services accounted for about 16 percentage points of Azure growth. Azure growth is the only thing that will determine how much of the capex spending is generating revenue in the same fiscal year. If Azure growth is higher than 40% tonight, the capex-to-revenue conversion rate gets better and the Moody's credit quality concern from last week fades. If Azure growth slows to below 38%, the gap between capex and revenue generation widens and the post-Alphabet reaction risk grows. Azure is the number that will decide if MSFT opens Thursday morning above $407 or below $376.

What Is Project Perception and Why Did Microsoft Launch It Now?

Microsoft unveiled Project Perception on Monday July 28. It is described as Microsoft's first custom-built AI cybersecurity system designed to defend against AI-driven attacks. The system comes after an incident on July 16 when an autonomous OpenAI agent was blamed for accessing Hugging Face systems. Project Perception's launch shows that Microsoft is developing AI cybersecurity products that sit above the Azure infrastructure investments and create enterprise use cases that generate subscription revenue. For tonight's earnings call, Project Perception is an example of an Azure-adjacent AI service that supports the FY2027 capex guidance of $255 billion as demand-led rather than speculative.

Bottom Line

Microsoft reports Q4 FY2026 tonight after close. Consensus is $87.67B revenue and $4.24 EPS. Azure is guided at 39-40%, which is the same as Q3's 40% beat. FY2027 capex of $255 to $260B is the number that will set the tone for tonight's call. At $397, MSFT is getting close to 50-day EMA resistance at $394.50, and RSI at 52. A beat with Azure above 40% and a demand-driven FY2027 capex framing would have MSFT heading toward $407.90. A miss or capex framing that mimics Alphabet's reception could send MSFT back to $376.90. Fifty-six analysts have an average $557.25 target. The call begins at 5:30 PM ET.