When Microsoft reports its fiscal first-quarter results on Wednesday, investors will be watching one number above all: the growth rate of Azure, the company's cloud computing platform. According to a new research note from Bank of America, that number should remain strong.
BofA Securities, the bank's brokerage arm, forecasts Azure revenue growth of 44.8% year over year in constant currency, reaching $32.3 billion. Constant currency means the figure strips out the effect of exchange-rate swings, giving a cleaner view of the underlying business. The forecast suggests that demand for cloud computing—especially from companies building and running artificial intelligence tools—shows no sign of slowing.
Why BofA is confident
The bank points to Microsoft's aggressive expansion of its data center capacity. Microsoft has been adding nearly 1 gigawatt of data center capacity per quarter, according to BofA. That's a huge amount of computing power—enough to run thousands of AI models and serve millions of customers. The more capacity Microsoft has, the more computing power it can sell to businesses that need to train and run AI applications.
BofA also sees early signs that Copilot, Microsoft's AI assistant, is turning into real revenue. Copilot is available as a subscription add-on to Microsoft's Office and other productivity tools, and the company has been redesigning its interface to weave Copilot into everyday work tasks. The bank expects "growing Copilot monetization," meaning more businesses are paying for the AI assistant through subscriptions and add-ons.
This is part of a broader trend: tech giants are racing to turn AI investments into actual sales. Some companies, like Infosys, have felt pricing pressure as AI reshapes the competitive landscape, but Microsoft appears to be benefiting from its position across the entire AI stack—from software applications and security to cloud infrastructure.
Beyond the quarter: higher profit forecasts
BofA didn't stop at the current quarter. The bank raised its earnings-per-share estimates for Microsoft for fiscal years 2027 through 2029, to $19.70, $23.43, and $28.49 respectively. Those are the profits Microsoft is expected to generate per share in those years, and the increases reflect confidence that Microsoft's AI investments will pay off over the long term.
The bank's reasoning: Microsoft has a unique reach across the enterprise AI stack. It sells the cloud infrastructure (Azure) that companies use to build AI, the software applications (like Office and Teams) that people use every day, and the security tools that protect those systems. That breadth means Microsoft can capture value at multiple layers of the AI boom, not just one.
What it means for investors
For everyday investors, the key takeaway is about margins, not just growth. Building data centers is a fixed-cost bet: the depreciation and operating costs show up whether servers are busy or idle. So the critical question for Microsoft's Q1 isn't just whether Azure's growth rate stays high, but whether profitability holds up as that new capacity comes online. If profit margins remain solid, it suggests demand is filling the servers fast enough to cover the costs.
There's also a longer-term implication. When analysts push more of the earnings story into 2027-2029, the stock starts to look more "long-duration." That means its valuation can swing more when bond yields change, because those future profits are discounted more heavily when rates rise. In other words, Microsoft's stock price may become more sensitive to interest rate moves than to near-term earnings surprises.
For context, other companies have shown how AI spending can affect results. SLB, an energy services firm, beat estimates on strong North America revenue, while Electrolux warned of cooling demand in some markets. Microsoft's report will be a bellwether for how AI-driven demand is holding up across the tech sector.
Investors will also be listening for any commentary on Copilot adoption and pricing. If Microsoft can show that Copilot is becoming a meaningful revenue stream, it would validate the company's heavy investment in AI and could support the stock's premium valuation. On the other hand, any signs that Azure growth is slowing or that margins are under pressure could weigh on shares.
As always, it's important to remember that analyst forecasts are just estimates. Microsoft's actual results could differ, and the market's reaction will depend on how the numbers compare to expectations. But BofA's note adds to the growing consensus that Microsoft is well-positioned to benefit from the AI wave, both in the near term and for years to come.
