Microsoft (MSFT) AI Stock Analysis

• Market Cap: $3.85T
• Dividend Yield: 0.64%
• Average Volume (3M): 20.23M
• Price to Earnings (P/E): 36.8
• Beta (1Y): 1.00
• Revenue Growth: 15.59%
• EPS Growth: 15.89%
• Country: US
• Employees: 228,000
• Sector: Technology
• Sector Strength: 88
• Industry: Software - Infrastructure
• EPS (TTM): 4.13
• Shares Outstanding: 7,432,377,400
• 10 Day Avg. Volume: 22,168,864
• 30 Day Avg. Volume: 20,229,531
• PEG Ratio: 2.34
• Price to Book (P/B): 10.76
• Price to Sales (P/S): 13.12
• P/FCF Ratio: 51.63
• Enterprise Value/Market Cap: 1.01
• Enterprise Value/Revenue: 13.22
• Enterprise Value/Gross Profit: 19.23
• Enterprise Value/Ebitda: 22.86
• 1Y Price Target: $632.78
• Price Target Upside: 22.20% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 33

• Rating: 82 Outperform
• Price Target: $628.00 ▲(21.28% Upside)

Microsoft's strong financial performance and positive earnings call are the most significant factors driving the score. The company's strategic focus on cloud and AI, along with robust revenue growth, supports a positive outlook. However, the high valuation and technical indicators suggesting an overbought condition are potential risks.

Positive Factors

Cloud and AI Growth

The robust growth in cloud and AI services positions Microsoft as a leader in these high-demand sectors, ensuring long-term revenue expansion and market dominance.

Strong Financial Performance

Consistent revenue and high profitability margins reflect Microsoft's operational efficiency and ability to sustain growth, supporting its competitive position.

AI Licensing Agreement

The AI licensing agreement with Gannett expands Microsoft's AI ecosystem, enhancing its technological capabilities and market reach in AI-driven solutions.

Negative Factors

High Capital Expenditure

High capital expenditures can strain cash flow and limit short-term financial flexibility, potentially impacting profitability if not managed efficiently.

Challenges in On-Premises Server Business

Declining revenue in the on-premises server business highlights challenges in traditional segments, which could affect overall revenue diversification.

Negative Other Income and Expense

Negative other income and expenses from investment losses can impact net income, affecting overall financial performance and shareholder returns.

Microsoft Business Overview & Revenue Model

Company Description

Microsoft Corporation is a global technology company that develops, licenses, and sells software, hardware, and services. Founded in 1975, the company operates in several sectors, including productivity and business processes, intelligent cloud, and more personal computing. Its core products include the Windows operating system, Microsoft Office suite, Azure cloud services, and Surface devices. Microsoft also plays a significant role in gaming through its Xbox platform and related services.

How the Company Makes Money

Microsoft generates revenue through a diverse range of streams. The largest portion comes from its Productivity and Business Processes segment, which includes revenue from Office 365 subscriptions and LinkedIn. The Intelligent Cloud segment, driven by Azure cloud services, has become a significant growth area, providing high-margin services to businesses. The More Personal Computing segment includes revenue from Windows operating system licenses, Surface devices, and Xbox gaming products. Additionally, Microsoft earns revenue from advertising through its search engine, Bing, and partnerships with various companies, enhancing its overall financial performance. Strategic acquisitions, such as LinkedIn and GitHub, further bolster its offerings and revenue potential.

Microsoft Financial Statement Overview

Summary

Microsoft's financial performance is robust, with strong revenue growth, high profitability, and efficient cash flow management. The company maintains a healthy balance sheet with low leverage and high return on equity, positioning it well for future growth and stability.

Income Statement

Microsoft's income statement shows strong financial performance with a consistent revenue growth rate of 4.29% in the TTM period. The company maintains high profitability with a gross profit margin of 68.82% and a net profit margin of 36.15%. The EBIT and EBITDA margins are also robust at 44.73% and 56.85%, respectively, indicating efficient operations and cost management.

Balance Sheet

The balance sheet reflects a solid financial position with a low debt-to-equity ratio of 0.18, suggesting prudent financial leverage. The return on equity is impressive at 32.44%, indicating strong profitability relative to shareholder equity. The equity ratio stands at 57.06%, showcasing a healthy capital structure with significant equity backing.

Cash Flow

Microsoft's cash flow statement demonstrates strong cash generation capabilities, with an operating cash flow to net income ratio of 0.96, indicating efficient cash conversion. The free cash flow growth rate of 8.95% in the TTM period highlights positive cash flow trends. However, the free cash flow to net income ratio of 0.53 suggests room for improvement in cash flow relative to net income.

Breakdown	TTM	Dec 2025	Dec 2024	Dec 2023	Dec 2022	Dec 2021
Income Statement
Total Revenue	293.81B	281.72B	245.12B	211.91B	198.27B	168.09B
Gross Profit	202.04B	193.89B	171.01B	146.05B	135.62B	115.86B
EBITDA	169.99B	160.16B	133.01B	105.14B	100.24B	85.13B
Net Income	104.91B	101.83B	88.14B	72.36B	72.74B	61.27B
Balance Sheet
Total Assets	636.35B	619.00B	512.16B	411.98B	364.84B	333.78B
Cash, Cash Equivalents and Short-Term Investments	102.01B	94.56B	75.53B	111.26B	104.75B	130.26B
Total Debt	60.56B	60.59B	67.13B	59.97B	61.27B	67.78B
Total Liabilities	273.27B	275.52B	243.69B	205.75B	198.30B	191.79B
Stockholders Equity	363.08B	343.48B	268.48B	206.22B	166.54B	141.99B
Cash Flow
Free Cash Flow	78.02B	71.61B	74.07B	59.48B	65.15B	56.12B
Operating Cash Flow	147.04B	136.16B	118.55B	87.58B	89.03B	76.74B
Investing Cash Flow	-85.75B	-72.60B	-96.97B	-22.68B	-30.31B	-27.58B
Financing Cash Flow	-46.92B	-51.70B	-37.76B	-43.94B	-58.88B	-48.49B

Microsoft Technical Analysis

• Technical Analysis Sentiment: Neutral
• Last Price: 517.81
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For MSFT, the sentiment is Neutral. The current price of 517.81 is below the 20-day moving average (MA) of 521.74, above the 50-day MA of 513.83, and above the 200-day MA of 460.20, indicating a neutral trend. The MACD of 4.06 indicates Negative momentum. The RSI at 47.69 is Neutral, neither overbought nor oversold. The STOCH value of 38.92 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for MSFT.

Microsoft Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
MSFT	―	$3.85T	36.84	32.24%	0.64%	15.59%	15.89%
AAPL	―	$4.01T	36.24	171.42%	0.38%	6.43%	22.85%
GOOGL	―	$3.40T	27.74	35.45%	0.29%	13.55%	34.26%
ADBE	―	$142.45B	21.20	52.87%	―	10.69%	35.19%
AMZN	―	$2.60T	34.52	24.33%	―	11.48%	50.70%
ORCL	―	$748.65B	60.79	71.15%	0.72%	9.67%	11.23%
Sector *	―	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%

Microsoft Corporate Events

Microsoft’s Strong Cloud and AI Performance Boosts Earnings

Microsoft Corporation, a leading technology company, is renowned for its innovative platforms and tools powered by artificial intelligence, serving a global customer base with a mission to empower individuals and organizations. In its latest earnings report for the quarter ending September 30, 2025, Microsoft posted impressive financial results, driven by strong performance in its cloud and AI sectors. The company reported a revenue increase of 18% to $77.7 billion, with operating income rising by 24% to $38.0 billion. Net income on a GAAP basis was $27.7 billion, marking a 12% increase, while non-GAAP net income rose by 22% to $30.8 billion. Diluted earnings per share also saw significant growth, with GAAP EPS at $3.72, up 13%, and non-GAAP EPS at $4.13, up 23%. A key highlight was the robust growth in Microsoft Cloud, which saw a revenue increase of 26% to $49.1 billion, reflecting strong customer demand. The Intelligent Cloud segment, including Azure and other cloud services, experienced a remarkable 40% revenue increase. Additionally, the Productivity and Business Processes segment grew by 17%, with notable contributions from Microsoft 365 and Dynamics 365. The More Personal Computing segment also saw a modest increase of 4% in revenue. Looking ahead, Microsoft remains optimistic, continuing to invest in AI and cloud technologies to capitalize on future opportunities, as indicated by the management’s positive outlook.

Microsoft Reports Strong Q1 2026 Financial Results

On October 29, 2025, Microsoft announced its financial results for the first quarter of fiscal year 2026, ending September 30, 2025, highlighting a strong performance driven by its cloud and AI services. The company reported an 18% increase in revenue to $77.7 billion, a 24% rise in operating income to $38.0 billion, and a 12% growth in net income to $27.7 billion on a GAAP basis. The results reflect the growing demand for Microsoft’s cloud platform, with significant contributions from Microsoft 365, Azure, and other cloud services. The company also emphasized its continued investment in AI and cloud technologies to capitalize on future opportunities, while returning $10.7 billion to shareholders through dividends and share repurchases.

The most recent analyst rating on (MSFT) stock is a Buy with a $625.00 price target. To see the full list of analyst forecasts on Microsoft stock, see the MSFT Stock Forecast page.

Manning & Napier Advisors LLC Reduces Microsoft Holdings

Mirova US LLC Reduces Stake in Microsoft Holdings

TRB Advisors LP Reduces Stake in Microsoft

Microsoft Board Member Carlos Rodriguez to Step Down

On September 24, 2025, Carlos A. Rodriguez, a member of Microsoft‘s Board of Directors, announced his decision not to seek re-election at the company’s 2025 annual shareholder meeting, citing personal reasons. His departure is not due to any disagreements with the company’s management, and Microsoft expressed gratitude for his service, particularly his roles as Chair of the Compensation Committee and member of the Audit Committee.

The most recent analyst rating on (MSFT) stock is a Buy with a $625.00 price target. To see the full list of analyst forecasts on Microsoft stock, see the MSFT Stock Forecast page.

Duquesne Family Office LLC Boosts Microsoft Stake

Ariel Investments LLC Boosts Stake in Microsoft

Cat Rock Capital Reduces Stake in Microsoft

Bill & Melinda Gates Foundation Trust Reduces Microsoft Stake

Hotchkis & Wiley Boosts Stake in Microsoft

Tci Fund Management Ltd Boosts Stake in Microsoft

H&H International Investment Reduces Stake in Microsoft

Viking Global Investors LP Reduces Stake in Microsoft

Maverick Capital Ltd Boosts Stake in Microsoft

Lone Pine Capital LLC Reduces Stake in Microsoft

Soros Fund Management LLC Boosts Stake in Microsoft

Appaloosa Management LP Reduces Stake in Microsoft

Clough Capital Partners Reduces Stake in Microsoft

Coatue Management Boosts Stake in Microsoft

Chilton Investment Co LLC Boosts Stake in Microsoft

Ardsley Advisory Partners Increases Stake in Microsoft

Altimeter Capital Boosts Stake in Microsoft by 83,041 Shares

Owl Creek Asset Management Increases Stake in Microsoft

Farallon Capital Reduces Stake in Microsoft Shares

Eagle Capital Management Reduces Stake in Microsoft

Night Owl Capital Boosts Stake in Microsoft

Kensico Capital Reduces Stake in Microsoft

Atreides Management, LP Reduces Stake in Microsoft

Woodline Partners LP Boosts Stake in Microsoft

Blackstone Inc. Increases Stake in Microsoft

Gilder Gagnon Howe Boosts Microsoft Holdings by 3,776 Shares

Moore Capital Management LP Increases Stake in Microsoft

Mairs & Power Inc Boosts Stake in Microsoft

Tiger Global Boosts Stake in Microsoft with 310,503 Shares

Manning & Napier Advisors LLC Reduces Microsoft Stake

Longview Partners Reduces Stake in Microsoft Shares

Bristol Gate Capital Reduces Stake in Microsoft

Gamco Investors Boosts Stake in Microsoft by 4,851 Shares

Columbus Hill Capital Boosts Stake in Microsoft

Fisher Asset Management LLC Reduces Stake in Microsoft

Gladstone Capital Management Reduces Stake in Microsoft

Vulcan Value Partners Reduces Stake in Microsoft

SCS Capital Management LLC Boosts Stake in Microsoft

Crake Asset Management LLP Reduces Stake in Microsoft

Dodge & Cox Reduces Stake in Microsoft Holdings

Sands Capital Management Boosts Stake in Microsoft

Bridgewater Associates Boosts Stake in Microsoft

Egerton Capital Boosts Microsoft Stake with 515,533 Shares

Weitz Investment Management Reduces Stake in Microsoft

Diamond Hill Capital Reduces Stake in Microsoft

Bowie Capital Management Reduces Stake in Microsoft

PRIMECAP Management Co Boosts Stake in Microsoft

Davis Selected Advisers Reduces Stake in Microsoft

Generation Investment Management LLP Reduces Stake in Microsoft

Guardcap Asset Management Ltd Reduces Stake in Microsoft

Yacktman Asset Management LP Reduces Stake in Microsoft

Suncoast Equity Management Reduces Stake in Microsoft

First Eagle Investment Management Reduces Microsoft Stake

Antipodes Partners Ltd Reduces Stake in Microsoft

Cryder Capital Increases Stake in Microsoft

Saybrook Capital /Nc Increases Stake in Microsoft

TRB Advisors LP Boosts Stake in Microsoft

ARK Investment Management LLC Reduces Stake in Microsoft

Microsoft’s Earnings Call: Strong Growth & Future Outlook

Microsoft’s latest earnings call painted a picture of robust growth and strategic advancements, with a notably positive sentiment. The company reported significant achievements across its cloud, AI, and gaming sectors, despite some challenges in its on-premises server business and the hiring market. Overall, Microsoft’s performance and future outlook remain strong, reflecting its strategic positioning in the tech industry.

Microsoft’s Strong Q4 Driven by Cloud and AI

Microsoft Corporation, a leading technology company, specializes in creating platforms and tools powered by artificial intelligence to deliver innovative solutions across various industries.

Morningstar Investment Boosts Microsoft Holdings by 1,705 Shares