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Microsoft, Google expected to beat estimates

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Thursday is a big earnings day for the tech sector: Both Microsoft and Google report their quarterly numbers after the closing bell.

Microsoft is expected to report a 15 percent increase in revenue to $20.74 billion, on a 12 percent rise in earnings per share, to 75 cents, according to Thomson One Analytics.

But the company faces some big challenges—namely the industrywide decline in PC sales—plus some big questions about the impact of its recent restructuring. Investors will be eager to hear about how well Surface tablets are selling and what to expect from the upcoming Xbox One launch.

"Although the PC market continues to search for a bottom, we believe Microsoft's enterprise-business continues to perform well and should enable it to roughly meet our estimates," said Stifel analyst Brad Reback, who has a "buy" rating on the stock.

"While we expect the quarter to be relatively noneventful, we note that similar to the past few quarters there could be some noise in the results (i.e., ~$780 million in Office deferrals recognized, potential inventory write-down, etc.), and given the recent run in the shares we would not be shocked if the shares take a near-term breather."

(Read more: Tech earnings preview: IBM, Intel and eBay)

Wells Fargo analyst Jason Maynard focused in on the impact of the recent reorganization and a having a new CFO in place, writing "we think that Fiscal Q1 guidance will likely be conservative and in line with current expectations."

Janney analyst Yun Kim warned that the reorganization could "potentially introduce a lower level of transparency," noting that Microsoft may not issue the fiscal year outlook for each of the business segments as it usually does.

But Kim is bullish on the impact of Surface. "We believe incremental revenue from its Surface business can more than offset the continued double-digit unit decline in the global PC market the company faced in the quarter."

Google's revenue is expected to shoot 50 percent higher than a year ago to $14.42 billion on 7 percent higher earnings per share of 11 cents. Though Google has made high-profile acquisitions, like Waze, to bolster its maps business, and has made a big push behind other services including Music and YouTube, the focus of its earnings will be on its core business—search.

And as consumers shift their time away from the desktop to mobile devices, investors are curious to hear about Google's mobile search revenue growth in particular.

Pivotal Research Group's Brian Wieser warned that Google's diversification will dilute margins: "We believe that newer sources of revenues such as online display advertising, YouTube, Google Fiber, consumer electronics and others are or will be lower margin, and paired with the ongoing need to pay distribution partners fees related to enabling their search engine as a default tool on mobile devices, expect compression to continue going forward."

Raymond James analyst Aaron Kessler wrote that one of his questions is about Google's traffic acquisition costs, after "mixed trends in the first quarter." He's also concerned about margin stabilization.

(Read more: As earnings take over, fundamentals to be tested)

With Google's Motorola preparing to launch its new Moto X Smartphone, analysts will surely ask how much Google will invest in marketing.

"The unit is reportedly set to spend $500 million marketing the new Moto X phone later this year, a notable figure considering that would account for almost four times the unit's entire sales and marketing budget recorded during 1Q13," wrote Pivotal's Wieser. Some reports put the number as high as $500 million.

The bigger question is: What can investors expect from mobile hardware growth, and what'll it cost?

And of course investors will be looking for any guidance for the rest of the year. Bank of America Merrill Lynch's Justin Post is bullish, with a "buy" rating and a $975 price tag. He wrote that he upgraded Google in the first quarter on anticipation of catalysts in the second half of the year, and continues to expect a lot of Google in the next five months.

"We continue to see easy second half comparisons, the Enhanced [ad] campaigns rollout, maturity of product listing ads, and Motorola product rollout as potential catalysts," in the second half of the year.

(Read more: Duking it out over earnings season)

With Google's shares hitting a new all-time high last week we'll see if earnings live up to heightened expectations.

—By CNBC's Julia Boorstin. Follow her on Twitter: @JBoorstin

  • Working from Los Angeles, Boorstin is CNBC's media and entertainment reporter and editor of CNBC.com's Media Money section.