Microsoft (MS) is set to announce earnings, and the options market is reflecting the potential for approximately $190 billion in market capitalization fluctuations.

The market is closely watching whether substantial results from large-scale artificial intelligence (AI) investments are materializing, identifying this as a key variable in the upcoming earnings report.

▲ Options Market Anticipates 6.6% Stock Price Volatility

According to Reuters on the 29th (local time), options traders expect Microsoft's stock price to rise or fall by approximately 6.6% following the company's fourth quarter earnings announcement on the 30th (local time).

This means value fluctuations of approximately $190 billion could occur based on current market capitalization.

According to ORATS (Options Research and Technology Services), Microsoft's average implied volatility in options was 4.8% during the last 12 earnings announcements, while actual stock price fluctuations were 4.4%. This current forecast significantly exceeds historical averages, indicating heightened investor caution.

▲ Proving AI Investment Returns is the Key Challenge

The rise in option prices is analyzed as stemming from Microsoft's positioning as a key company for gauging AI investment performance.

Microsoft is a representative hyperscale company that has undertaken large-scale AI infrastructure investments. It was one of the major companies leading the AI rally this year, but recently the cost burden from expanded AI investments is heightening investor concerns.

Reuters reported that if current trends continue, major hyperscalers' capital expenditure (CAPEX) is expected to exceed free cash flow (FCF) by 2027.

Seth Hickle, Chief Investment Officer of Mindset Wealth Management, said "The market now wants actual results" and evaluated that "this earnings season will be a stage to verify AI execution capability rather than expectations for AI."

▲ Stock Price Down 18% Since Beginning of Year

Microsoft's stock price has fallen approximately 18.7% since the beginning of this year. In comparison, the S&P 500 index rose 8.52% during the same period, showing relatively weak performance.

The company's third quarter capital expenditure for its fiscal year increased 49% year-over-year to $31.9 billion. However, this was lower than the previous quarter's $37.5 billion.

The market is expected to intensively verify whether large-scale AI investments are translating into actual customer expansion and profitability improvements for the company.

▲ Focus on Azure Growth and AI Service Adoption

Investors are watching not only the growth of the cloud platform Azure but also how actively enterprise customers are adopting Microsoft AI services as key indicators.

Whether the number of customers utilizing AI services within the company's ecosystem is increasing, or whether they are shifting to external AI service providers, is expected to serve as a standard for judging future growth potential.

Peter Anderson, CEO of Anderson Capital Management, said "investors have already sufficiently confirmed the scale of AI investment" and noted that "now they are demanding tangible results to prove investment returns."

He added that "whereas 'Fear of Missing Out (FOMO)' drove the market in the past, now 'fear of overinvestment' is growing."

Microsoft [Reuters/Yonhapnews Photo]

▲ Large-Scale Call Option Purchases Maintain Optimism

Some investors continue to maintain strong bullish expectations for Microsoft.

According to Chris Murphy, co-head of derivatives strategy at market maker Susquehanna, one investor purchased 20,000 Microsoft call option contracts on the 28th by investing approximately $10.4 million.

This was interpreted as an investment strategy anticipating the stock price will exceed $450 by August. A call option refers to the right to purchase stock at a predetermined price within a certain period.

Murphy explained that "despite recent stock price weakness, investors willingly paid high option premiums to bet on upside potential."

Recently, Microsoft has conducted workforce reductions to cut costs and is undergoing organizational restructuring in its Xbox-related business.

▲ Positive Outlook Across the Software Industry

Investors maintain positive forecasts not only for Microsoft but for the software industry as a whole.

Murphy revealed that investors purchased 100,000 call option contracts on the "iShares Expanded Tech-Software ETF" ahead of Microsoft's earnings announcement and the Federal Reserve meeting.

This move is interpreted as showing confidence not only in Microsoft but also in the growth potential of the entire software industry.

▲ Meta Earnings Also Test AI Investment Performance

The market is also paying attention to Meta Platforms, which is announcing earnings on the same day.

According to ORATS, the Meta options market anticipates stock price movements of approximately 7.8% following the earnings announcement. This is slightly above the recent 12-period average expected volatility of 7.3%.

In reality, Meta's stock price has historically moved approximately 7.9% on average, showing somewhat greater volatility than options market expectations.

Matt Amberson, founder of ORATS, analyzed that "volatility has significantly expanded following earnings announcements over the past year, with particularly strong market reactions in the last three quarters."

Matthew Smart, Chief Investment Officer of WWM Investments, forecasts that investors will closely examine Meta's core advertising business growth and how much AI is improving user engagement and advertising efficiency.