Microsoft Earnings Growth Expected to Continue With Demand for Cloud Services

Through the pandemic, Microsoft and other business-software companies experienced booming stock prices and sales as organizations around the world used more digital tools to help with remote working. This has bolstered demand for Microsoft’s office applications as well as its cloud-infrastructure services.

Analysts and investors will be looking for signs that demand is cooling. Software shares have been sliding this year, with Microsoft down more than 15%, in line with the Nasdaq Composite Index.

Microsoft remains the second-largest cloud-infrastructure vendor behind

Amazon.com Inc.,

but the company has been gaining market share by using its leadership in office applications as leverage to grab big deals for its Azure cloud. It had nearly 20% of the market in 2020, according to research firm

Gartner Inc.

—well behind Amazon Web Services’ 40%, but up from 7% in 2016.

Microsoft’s cloud-market push has come under criticism in Europe, where rivals have filed antitrust complaints. Last summer, French company OVHcloud filed one over licensing terms that it says make Microsoft products more expensive to use on non-Microsoft clouds.

A Microsoft spokesman said in response to the complaint that it is continuously evaluating how it can best work with partners.

Dan Morgan,

senior portfolio manager at Synovus Trust Co., said he will be monitoring Microsoft’s earnings for an echo of last week’s impressive numbers from

International Business Machines Corp.

, which got a sales boost from a surprisingly strong cloud performance.

“This gives evidence that the enterprise software space is still ‘alive and kicking,’” Mr. Morgan wrote in a recent note.

Microsoft has had a busy year. In January, it announced its biggest-ever acquisition with its $75 billion offer for

Activision Blizzard Inc.,

developer of such popular videogame franchises as Call of Duty, World of Warcraft and Candy Crush. The deal is expected to bolster Microsoft’s Game Pass subscription service, which offers a library of games for a monthly fee.

The videogame arm generated close to 10% of Microsoft’s revenue in 2021. The company is trying to build it into another core business, by using its cloud infrastructure to take the lead in an emerging cloud-gaming sector.

Microsoft doesn’t expect the Activision deal, being reviewed by the U.S. Federal Trade Commission, to close until next year. New Chairwoman

Lina Khan

has taken steps to increase scrutiny of deals. If it does close, Microsoft said it would become the third-largest gaming company by sales, with 30 game studios under its management.

Even after the Activision deal, Microsoft still has plenty of cash—$130 billion at the end of its fiscal 2021, with a further $200 billion in operating cash flow projected over the next three years. Investors will be looking to for indications that the company is considering more acquisitions.

Write to Aaron Tilley at aaron.tilley@wsj.com