As recently as last year, the notion that analysts and investors would give Microsoft (NASDAQ:MSFT) a break would have seemed outlandish. Mired in a multi-decade slump, Microsoft and its stock price seemed irrevocably stuck in neutral, making it an easy target for naysayers. Now, fast-forward a year as Microsoft's new CEO, Satya Nadella, prepares for his first earnings announcement faced with so-so analyst expectations, and its stock price is still holding up nicely. That kind of support used to be reserved for stalwarts like old nemesis Apple (NASDAQ:AAPL). Not any more.

In the past, forecasting what many expect to be a flat quarter compared to Microsoft's year-ago period would have been a recipe for a stock-price disaster. But times have changed, as has Microsoft, since the days of not being able to please anyone, at any time. That title seems to belong to Apple now, which can't seem to get out of its recent stock price funk. The year-to-date stock performance of the two former adversaries tells the story: Microsoft is up 5.75% and Apple is down 5.8%.

Some background
Last quarter Microsoft announced earnings and revenue that exceeded most everyone's expectations. Former CEO Steve Ballmer's better-late-than-never transition to cutting-edge technologies like cloud computing and big data, along with moving the Microsoft team headlong into mobile, began paying off in its fiscal Q2 ending Dec. 31, 2013.

Microsoft ended the holiday season with a record-breaking quarter, generating a total of $24.52 billion in revenue, a 14% jump on a GAAP basis compared to the prior year's Q2. Not bad, but what really got investors excited was how Microsoft was able to achieve its lofty results. Commercial cloud sales, along with the number of Office 365 and Azure customers, all more than doubled last quarter. Even Microsoft's devices and services revenue increased to $11.91 billion, a 13% jump compared to last year.

Apple, as it prepares for its earnings announcement after the close today, has suffered from a lackluster stock price in large part because of a perceived lack of innovation. Yes, the iPhone continues to dominate the domestic smartphone market, Apple has more ready cash than most small countries, and it has a rabid base of iFans. But with concerns about entering emerging markets with nothing but a high-end lineup of iToys, and little new coming down the pike in what feels like forever, Apple needs a blow-out quarter and a cutting-edge product for its stock price to gain some traction.

That was then, this is now
Another example of the change in views of the two industry leaders are the number of pundits who not only expect Microsoft to meet estimates but beat them. It was estimates that were to blame for Apple's difficult year-to-date share-price performance. Apple CEO Tim Cook jump-started a sell-off that ended up shaving over $44 billion in market cap last quarter by announcing guidance -- for this quarter -- below expectations. That type of knee-jerk reaction used to be Microsoft territory.

The consensus estimates are for Microsoft to generate $20.6 billion in revenue in fiscal Q3, along with earnings per share of $0.62. By comparison, 2013's Q3 results were $20.5 billion in revenue, which translated to $0.72 a share in earnings. Flat year-over-year revenues and a 16% decline in earnings per share wouldn't normally be cause for celebration.

Apple, much like Microsoft, is expected to announce flat revenues and earnings compared to last year. Consensus estimates suggest Apple will generate $43.42 billion in revenue in its Q2 and earnings of $10.18 a share. Last year at this time, Apple had $43.6 billion in sales and had earnings of $10.09 a share. But when Cook shared the so-so quarterly guidance, Apple stock got battered.

Final Foolish thoughts
Analysts and investors alike have chosen to focus on Microsoft's future, and that means monitoring results in the aforementioned key areas of cloud computing and mobile. Sales of over five million Xbox One's is great, but that's not what's driving Microsoft's good tidings among investors. What is?

In short, Nadella. When Nadella introduced Microsoft's much-anticipated Office for iPad, he quickly became the star of the show, and his "mobile first, cloud first" mantra struck a positive chord with Microsoft shareholders. Tellingly, Nadella also mentioned the need to continually innovate. That's a word that used to be the driving force behind Apple.

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Tim Brugger has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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