Microsoft (MSFT) is scheduled to report results of the second quarter of its fiscal year 2022 after the market close on January 25, with a conference call scheduled for 5:30 pm ET. What to watch for:

1. OUTLOOK: During the company’s last earnings call, Microsoft said it saw second-quarter revenue between $50.15-$51.05B, with consensus at $50.88B. The company also said it saw second-quarter Productivity and Business Processes revenue of $15.7B-15.95B, Intelligent Cloud revenue of $18.1B-18.35B, More Personal Computing revenue of $16.35B-$16.75B, OPEX of $12.7B-$12.8B, and tax rate of about 17%. Microsoft's guidance did not include Nuance (NUAN) acquisition.

2. ACTIVISION ACQUISITION: Earlier this month, Microsoft announced plans to acquire Activision Blizzard (ATVI), which it calls "a leader in game development and interactive entertainment content publisher," stating that this acquisition will "accelerate the growth in Microsoft's gaming business across mobile, PC, console and cloud and will provide building blocks for the metaverse." Microsoft will acquire Activision Blizzard for $95.00 per share, in an all-cash transaction valued at $68.7B, inclusive of Activision Blizzard's net cash.

"When the transaction closes, Microsoft will become the world's third-largest gaming company by revenue, behind Tencent [TCEHY] and Sony. The planned acquisition includes iconic franchises from the Activision, Blizzard and King studios like 'Warcraft,' 'Diablo,' 'Overwatch,' 'Call of Duty' and 'Candy Crush,' in addition to global eSports activities through Major League Gaming. The company has studios around the word with nearly 10,000 employees," Microsoft said. Once the deal closes, the Activision Blizzard business will report to Phil Spencer, CEO, Microsoft Gaming. "Gaming is the most dynamic and exciting category in entertainment across all platforms today and will play a key role in the development of metaverse platforms. We're investing deeply in world-class content, community, and the cloud to usher in a new era of gaming that puts players and creators first and makes gaming safe, inclusive, and accessible to all," said Satya Nadella, chairman and CEO, Microsoft.

Meanwhile, Phil Spencer, head of Xbox at Microsoft, said he had "good calls" with leaders at Sony (SONY) in the wake of Microsoft's proposed acquisition of Activision Blizzard. "I confirmed our intent to honor all existing agreements upon acquisition of Activision Blizzard and our desire to keep Call of Duty on PlayStation," Spencer said. "Sony is an important part of our industry, and we value our relationship."

3. ANOTHER ROBUST PERFORMANCE EXPECTED: Ahead of quarterly results, Wedbush analyst Daniel Ives said that based on his recent checks, he believes Microsoft saw another robust performance in the December quarter led by Azure/Office 365 with his expectations to see a 3% topline beat and upside across the board, which should be a major boost in the arm for the overall tech sector looking ahead. For Microsoft, while the Activision (ATVI) acquisition was a major bet on its consumer strategy for the coming years, the underlying growth story is built around the game-changing enterprise cloud transformation which is giving the company clear tailwinds into 2022/2023, Ives contended. The analyst has an Outperform rating and a price target of $375 on the shares.

On Wednesday, Morgan Stanley analyst Keith Weiss said that following Microsoft's M&A news, a solid earnings report that highlights the company's strong secular positioning, durable margins, high teens total return profile and reasonable multiple "likely reminds investors why [Microsoft] is the asset to own in unsettled markets." Ahead of the company's upcoming fiscal second-quarter report, Weiss kept an Overweight rating and $364 price target on Microsoft shares.