Microsoft earnings — 'You can think of agents as the new apps,' CEO Satya Nadella

All eyes on Microsoft’s stock

Microsoft’s Q2 fiscal earnings today could make or break its current stock price. The software giant’s stock has underperformed compared to the rest of the tech sector over the last six months and is currently down by around 14% at $478 since its all-time high off $555 at the end of last year.

If Microsoft can show its massive investment in AI has paid off in terms of revenueits stock could jump up.

What’s next for Xbox

Xbox has seemingly fumbled the ball this console generation with Sony currently holding the reins as the PS5 has continued to outsell both the Xbox Series X and Series S.

Given that those consoles are now five years old after launching back in 2020Microsoft is already working on a follow-up. Howeverthe question remains what the company is planning to do to set its next console apart from the competition.

There’s been talk of integrating PC game stores like Valve’s Steam and the Epic Games Store and the next Xbox may end up being more PC than console which will certainly carry a more premium price. It will also have to compete against Valve’s upcoming Steam Machine too. Hopefully we learn a bit more about the state of Xbox and Microsoft’s gaming plans in today’s call.

Previous earnings call focused on AI

The last Microsoft earnings call was held on October 292025.

There's a lot to go through in the hourlong discussionbut a big chunk of the call is focused on AI and Microsoft Azurethe company's cloud computing service.

Satella also discussed Copilot and a deal with OpenAI.

Nadella is excited about Agentic AI

During the Q&A portion of the last earnings callNadella was asked about agentic AI and he seems quite excited about the future of AGI.

"I feel actuallypretty good about both the progress in AI. I don’t think AGIas definedat leastby us in our contractis ever going to be achieved anytime soonbut I do believe we can drive a lot of value for customers with advances in AI models by building these systems. It’s the real question that needs to be well understoodand I feel veryvery confident about our ability to make progress."

Are we in a bubble?

Hood and Nadella were asked if we're in an AI bubble and how Microsoft is ensuring that it can both meet current demand but also that it's sustainable (financially).

"Those are very long-lived assetsas we’ve talked about15 to 20 years. And over that period of timedo I have confidence that we’ll need to use all of that? It is very high," Hood said.

"When I look at the entirety of these high value agent systemsand when we look at the efficiency of and fungibility of our fleetthat’s what gives us the confidence to invest both the capital and the R&D talent to go after this opportunity," Nadella added.

A question of hardware

As we enter a new yearthe question will be whether or not Microsoft discusses any future hardware plans for 2026.

We are several months from Microsoft Build (which is also moving to a new city)so it's not clear if hardware will be top of mind for the tech giant.

Now is the time for future prognostication from the companywhich I do expect we'll hear today.

What do you want to hear form Microsoft?

These earnings calls are mostly for investors and interested financial institutes. But they do sometimes reveal plans about the company's future.

Let us know if there's anything you hope to learn about Microsoft's 2026 plans?

Not off to the best start

Microsoft has been pushing AI and Copilot as integral to the Windows experience but people have not been responding.

And it doesn't help that the recent January patch to fix things ended up stirring even more bugs in Windows 11.

We doubt they'll mention this on the call.

Azure and infrastructure

Last weekMicrosoft suffered a massive 365 and Outlook outage that lasted nearly 48 hours. Like many of the major outages in the last couple of yearsit's all based around infrastructure and the failure.

As my colleague Jason England points outcompanies need a backup plan and to bolster their infrastructure.

I'm curious if any investors will ask about the outage.

Xbox goes ARM on Windows 11

Recentlythe Xbox app finally arrived on Arm-based Windows 11 PCs.

“Windows and Xbox continue to collaborate across the gaming communityOEMssilicon innovators and game studios to expand catalog compatibility and deliver a consistently great Windows gaming experience—whether you’re on a powerful desktopa purpose‑built handheldor an Arm‑based Windows 11 laptop," the company said.

But is it enough for Microsoft to hold on to its PC gaming dominance.

Copilot vulnerability

Microsoft recently patched a major Copilot vulernability that could have resulted in personal data being stolen.

We expect the company to discuss the AI tool in today's earnings callmost likely in terms of its growth and integration into Windows systems.

Expect reports of major growth

CNBC is reporting that Microsoft is expected to report major growth in several areas including Microsoft Azure cloud infrastructure.

It's also expected that expendituresespecially around data center builds and leasing will be up by nearly 50%.

Microsoft's stock fell 10% in the last quarterso we're certain that will come up.

Did you know there's a boycott against Microsoft and Xbox

Despite the Xbox Ally and Game PassXbox has had a seemingly poor recent run.

Plusthe company faces an ongoing boycott over the alleged "complicity in Israel's genocide in Gaza."

Here's more information if you're curious.

Microsoft Maia

RecentlyMicrosoft announced the new Maia 200 chipmeant for scaling AI inference.

The new chip is supposed to take on Google and Nvidia when it comes to AI. As TechCrunch reportsthe Maia 200 chip is supposed to be more power efficient and use less power compared to competitor chips and the older Maia 100 chip.

I expect we'll hear about this new chip during the earnings call today.

We are one hour out from today's earnings call

Microsoft's 2026 Q2 earnings call kicks off at 2:30 pm Pacific and should last until 3:30 pm.

We'll be following along with the webcast. If you want to listen in you can go here but we'll also be listening and posting information that will be relevant to customers and not just the money people.

Numbers for Microsoft have been released

Microsoft just released its financial year 2026 quarter two numbers. As expectedcloud services and AI are the headliners.

“We are only at the beginning phases of AI diffusion and already Microsoft has built an AI business that is larger than some of our biggest franchises," CEO Satya Nadella said in a press release. “We are pushing the frontier across our entire AI stack to drive new value for our customers and partners.”

Microsoft Cloud revenue hit over $50 billion in Q2. Despite that stock shares fell as Cloud growth was slower than expected.

AdditionallyXbox content and services took a hitwith the company noting that decreased 5%

Xbox continues to lag behind

As mentionedmost of the numbers released by Microsoft reflect on investment and revenue from AI and Cloud.

Howeverburied in there are numbers regarding personal computing.

SurprisinglyWindows OEM and devices stayed relatively stagnant but Xbox decreased again.

·"Xbox content and services revenue decreased 5% (down 6% in constant currency)"

The previous earnings call Xbox was bolstered by the release of the Xbox Ally handheld Pcsbut nothing new has happened since then despite the holiday season just passed.

10 minute countdown

The Microsoft Q2 earnings call kicks off in 10 minutes.

While we have the numbers alreadyNadella and Hood are expected to go into more detail as part of the call. Plusthere will be a Q&A section where investors can ask questions. We may learn more about Microsoft's quarter and future plans from those inquiries.

Microsoft's stock up today

Microsoft's stock ended the day at $481.63an increase of $1.05. It seems investors were optimistic going into the numbers coming out and based on the massive revenue of $81.3 billion (an increase of 17% year-over-year) generated by Microsoft in the quarterit seems they were right.

The call begins

We're officially into Microsoft's earnings call where we will hopefully learn some new information about the company's plans going forwardhow intends to deal with Xbox lagging behind and other news.

Satya NadellaChairman and CEOpresenting

Satya Nadella started the call by discussing Microsoft's $50 billion in cloud revenuea first for the firm. He also talked about the AI business being larger than some of the company's other business areaswhere the company has spent many years working.

He also discussed improvements to the performance of its AI models. He said Cobalt 200 is a big leap forwarddelivering 50% better CPU performance for the Cloud.

Nadella on agents

"You can think of agents as the new apps."

Microsoft's CEO talked about offering lots of models for users based on their needsthough this is based more around enterprisenot as much for the average computing user running CoPilot on their laptop.

Copilot for consumers

Microsoft's CEO says it has seen a 3X increase in users to its CoPilot AI platform thanks in part to integration into Windows. He also talked about Microsoft 365 Copilot accuracy with AI and daily users increasing 10X per year.

In totalhe said it was a record quarter for Copilot within Microsoft 365which means we can expect to see the company push advancements with it morewhether we like it or not.

Positive spin on Xbox

While Microsoft reported that Xbox content and services revenue decreased 5%the company's CEO cited some positives in game streaming. "We saw record PC players and paid streaming hours on Xbox."

After hours stock drop

While the end of market stock price was uponce the numbers came outthere was a big drop. As of this postit's down $22.86which is a 4.75% dip.

Looking ahead to Fiscal Year 2026 Q3

Microsoft shared some of its outlooks for its earnings in the next quarter. You can see it all at the company's investor relations website (and some of the key info above)but the key thing that's most interesting is that the company expects to see revenue of $80.65 billion to $81.75 billion.

Microsoft Q&A starting now

The company is beginning the Question & Answer portion of the call. Hopefullythe company gives us some interesting tidbits about the futurebut we'll see.

Microsoft in a good spot

In a statementJohn BeltonPortfolio ManagerGabelli Fundssaid "Microsoft is well positioned to distribute AI technology through their productivity apps. And on Copilotthe sentiment in the market is very negative. I think that’s going a little bit better than people give it credit for.

Historicallyit’s taken Microsoft some time to figure these things outbut they have the distribution in the end. They have a lot of built-in advantagesand a lot of times they do end up coming out on top," Belton said.

"Microsoftin terms of the return on all the spendI view them as more the adults in the room. They’re going at a more measured pace in building out infrastructure. The market would clearly like them to go even fasterand I think that’s been the constraint around Azure.

But by and largethe biggest companies are already generating pretty decent returnstrading at relatively digestible multiplesespecially in the context of the broader marketand they’re going at a nice pace," Belton explained.

OpenAI deal was huge

An important thing to note from Microsoft's earnings report is that the company's net income increased by $7.6 billion from its investment in OpenAI. That deal was obviously huge for the success the company saw during the quarter. It would be interesting see where the company would be if it weren't for this massive deal.

Microsoft talked around the RAM crisis

During the Q&AHood and Nadella were asked about investing and the return on investment for some the company's AI efforts and Azure cloud computing.

Hood discussed GPUs and CPUs for Azure and the investmentbut did not directly address the ongoing RAM crisis that is largely led by memory hungry data centers.

It makes sense that Microsoft wants GPUs for its data centers but what about its consumer products like Windows 11 laptops especially made by partners like Lenovo or Dell who are hoarding RAM. It's a question I haven't seen asked or answered yet.

That's all the news out of Microsoft

We've pulled out everything we could from today's earnings call. Did we miss anything? Let us know.