Investors have some big questions heading into Microsoft's (MSFT -0.32%) fourth-quarter report in a few days. The stock is trailing the market even though sales and earnings spiked in the previous period, which ended in late March.

Wall Street is bracing for weaker results in Microsoft's upcoming announcement, which covers the quarter that ended in June and the overall fiscal year. But investors' bigger fear is that the tech giant will describe a tough demand environment in areas like PC software, gaming, and video communication when it issues its outlook for fiscal 2023.

Let's take a closer look at the report set for Tuesday, July 29.

Mixed sales trends

Microsoft's sales trends have been slowing lately. Revenue expanded by 18% last quarter compared to 20% in the previous quarter as consumers and enterprises focused a bit less on tech hardware and software services.

Heading into this announcement, investors are bracing for a more pronounced deceleration as global revenue gains slow to about 14% in fiscal Q4. That slowdown won't be uniform throughout Microsoft's wide portfolio, though.

Look for the cloud services segment to expand at a brisk pace while weaknesses show up in the personal computing and gaming divisions. Consumers aren't prioritizing spending in these areas like they were in earlier phases of the pandemic, and that's a key factor pressuring parts of Microsoft's business today.

Cash and profits

Its tech stock status leaves Microsoft less exposed to the types of supply chain, transportation, and input cost challenges facing many other businesses today. But expenses are still rising in areas like wages.

MSFT Cash from Operations (TTM) Chart

MSFT Cash from Operations (TTM) data by YCharts.

The company easily handled those pressures last quarter, as gross profit margin held steady at 67% of sales. Microsoft's operating income was also strong, landing at $22.2 billion, or a blistering 43% of sales. Continued wins in this area should support impressive shareholder returns, even as sales gains slow.

Looking ahead

In late April, CEO Satya Nadella highlighted Microsoft's market share gains in diverse areas such as gaming, personal computing, and digital work messaging. "We are expanding our opportunity," Nadella said. Executives also noted surprisingly strong demand for its cloud platform, which competes with rivals including Amazon.

Investors are bracing for a potentially less bullish outlook for the coming year. Demand is shifting away from areas like video communication and gaming as consumers emerge from COVID-19 social-distancing efforts.

Microsoft is likely to achieve global sales growth of around 18% in the fiscal year that just closed. Heading into Tuesday's announcement, most investors expect those gains to moderate to about 14% in fiscal 2023. Earnings are projected to climb to about $11 per share from $9.30 per share.

Those expectations could change significantly in response to management's update about the latest demand and profitability trends. But even a weaker outlook shouldn't scare investors away from this stock. Microsoft is a cash-rich business with many attractive growth avenues to exploit over the next decade. Modest wins in just a few of these areas should be enough to support solid shareholder returns.