Microsoft will test its reputation as one of the key stocks in the market rally and in the AI race with its latest quarterly report, due out after the bell on Thursday. Year-to-date, the tech giant’s shares are holding on to gains of nearly 5%, although they are down more than 7% year-to-date in April. MSFT Mountain YTD Microsoft shares rose more than 7% in the year through April 24. Investors will be looking to see if Microsoft’s report can restart the rally, but the benchmark for success may very high. After the company reported second-quarter financial results in January, shares fell more than 2% in the following session despite increases in revenue and profits. The Story of AI Microsoft is considered one of the companies best positioned to take advantage of recent advances in artificial intelligence. The main area of optimism today is Azure, the company’s cloud division. Cloud demand is expected to increase as AI requires high computing power and data storage. Another area is Copilot, the AI tool that Microsoft is integrating with its Office software product suite. Investors and analysts will be looking at how those AI businesses are performing and how quickly management expects them to grow. “In general, we expect gradual adoption to begin this year [the second half of the 2024 calendar year]with greater material adoption and enhanced revenue in [calendar year 2025]Jefferies analyst Brent Thill said in a note Wednesday. “That said, we expect AI’s contribution to Azure growth to increase as our tests indicate strong demand for Azure AI services and increased workloads.” increases as more models enter production. We’ll want to see signs supporting strong adoption of MSFT’s Copilots and its $10B AI traction. [annual recurring revenue] The target we expect it to achieve in F4Q,” added Thill, who has a Buy rating on the stock. Microsoft’s big jump in its third fiscal quarter. Analysts surveyed by LSEG are expecting earnings per share of $2.82 on revenue of $60.8 billion. Both of these indexes will increase by 15% over the same period last year. Wall Street is overwhelmingly positive on the stock, with more than 90. According to LSEG, % of analysts rate Microsoft as a “buy” or “strong buy.” Beyond the headline numbers, there are several key segments that analysts have highlighted in the run-up to the earnings release. One is Azure’s revenue growth and specifically how much of it is driven by AI. The company said in January that Azure and other cloud services sectors grew revenue 30% year-over-year in the fiscal second quarter. Stifel analyst Brad said AI workloads grew nearly $400M/Q in the December quarter (~6% of Azure locations vs Q3 in September). Reback in a note to customers on Sunday. Reback has a buy rating on the stock. Some areas where Microsoft may be concerned include its capital expenditure ratio and exposure to a potentially weakening part of the economy. “MSFT has more [small- and medium-sized business] and consumer exposure than any other stock we care about, and while those cohorts have held up surprisingly well during this weak macro period, we’re starting to see some signs of weak demand from them,” Guggenheim analyst John DiFucci said in a note Sunday. neutral rating on the stock – CNBC’s Michael Bloom contributed reporting.