Microsoft Earnings: 6 Questions

Microsoft Office For iPad: 7 Questions Answered

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For the first time in what seems like years, Wall Street is bullish on Microsoft. In recent months, the company's stock has traded at its highest levels since the dotcom boom, flirting with the symbolically important $40 mark in the process.

Not only shareholders but analysts have been impressed as well. In a research note published this week, for example, Forrester analysts say Microsoft's new cross-platform emphasis should "bear fruit as more consumers and more companies look to run familiar Microsoft software on all their devices."

Compare all this to the situation last summer, when Microsoft, already wounded from months of Windows 8 scorn, took a near $1 billion write-down on unsold Surface inventory. That debacle triggered one of the biggest one-day sells-offs in Microsoft history, and provided abundant fodder for critics of then-CEO Steve Ballmer's consumer-focused plans.

[Just updated to Windows 8.1? Read Windows 8.1 Update: 8 Tips to Avoid Headaches.]

Since then, Ballmer announced his retirement, which caused Microsoft's stock to rally. The company also unexpectedly posted record revenue earlier this year, during Ballmer's final earnings call, with strong cloud and services growth overshadowing ongoing Windows trouble.

Microsoft's momentum shifted into a still higher gear this month, largely because Ballmer's replacement, Satya Nadella, has hit all the right notes. It's early in Nadella's tenure, which makes it unclear how big a hand he's had in recent product announcements, such as Office for iPad. But other new releases, such as the company's revamped data platform, clearly bear his signature.

Microsoft CEO Satya Nadella scored early victories but will face tough questions from investors.

Most important, the new CEO has set a different tone than his predecessor; in contrast to Ballmer's trademark bombast and Windows cheerleading, Nadella drops references to TS Eliot, emphasizes cross-platform opportunities, characterizes Microsoft as an underdog, and champions data over virtually all else.

This Thursday, Microsoft will release its first earnings report since Nadella took over. Analysts anticipate earnings and revenue will be down relative to last year, thanks in large part to weak consumer PC sales. But that hasn't dampened enthusiasm for Nadella, even as Wall Street has turned a skeptical eye this year toward Apple, Netflix, Google, Amazon, and other large tech stocks. Given that he inherited rather than created Microsoft's most troubled assets, investors might give him some leeway, assuming none of the cloud products he once managed unexpectedly underperforms.

Even so, Nadella will face tough questions about Windows XP's retirement, Windows 8.1's struggles, Microsoft's consumer hardware efforts, and other trouble spots. Will Microsoft continue to ascend, or is the Nadella honeymoon beginning to wind down? Here are six questions we think he'll have to answer.

1. Are Microsoft's cloud and enterprise services compensating for falling Windows revenue?
Microsoft makes billions from its operating systems, but Windows revenue is shrinking for a variety of reasons including falling PC sales, especially among consumers; weak Windows 8 adoption; and reported reductions in OEM license fees. This downward trend is likely to continue, given that

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