Microsoft (MSFT)
NASDAQ:MSFT
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Microsoft
(NASDAQ:MSFT)
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Rating:74Outperform
Price Target:
$415.00
▼(-1.84% Downside)
Action:ReiteratedDate:01/30/26
The score is driven primarily by exceptional profitability and balance-sheet strength, supported by bullish AI-led demand and constructive forward guidance. Offsetting these positives are weak current technicals (price below key moving averages with negative MACD) and near-term cash flow/margin pressure tied to elevated AI infrastructure spending; valuation remains premium with a low dividend yield.
Positive Factors
Balance sheet strength
Very low leverage and a large equity base give Microsoft durable financial flexibility. Modest debt and strong ROE support continued investment in cloud and AI capacity, M&A optionality, and shareholder returns while helping absorb macro shocks without threatening capital structure.
Negative Factors
Weakened free cash flow conversion
While operating cash flow remains very large, the sharp decline in free cash flow conversion and negative TTM FCF growth signal reduced internal funding efficiency. If persistent, this constrains capital allocation flexibility for buybacks, dividends or sustained high CapEx cycles.
Read all positive and negative factors
Positive Factors
Negative Factors
Balance sheet strength
Very low leverage and a large equity base give Microsoft durable financial flexibility. Modest debt and strong ROE support continued investment in cloud and AI capacity, M&A optionality, and shareholder returns while helping absorb macro shocks without threatening capital structure.
Read all positive factors
Microsoft (MSFT) vs. SPDR S&P 500 ETF (SPY)
Market Cap
$3.05T
Dividend Yield0.71%
Average Volume (3M)31.10M
Price to Earnings (P/E)23.4
Beta (1Y)1.01
Revenue Growth16.67%
EPS Growth28.60%
CountryUS
Employees228,000
SectorTechnology
Sector Strength88
IndustrySoftware - Infrastructure
Share Statistics
EPS (TTM)4.14
Shares Outstanding7,425,629,000
10 Day Avg. Volume27,152,742
30 Day Avg. Volume31,101,956
Financial Highlights & Ratios
PEG Ratio2.34
Price to Book (P/B)10.76
Price to Sales (P/S)13.12
P/FCF Ratio51.63
Enterprise Value/Market Cap1.06
Enterprise Value/Revenue10.60
Enterprise Value/Gross Profit15.46
Enterprise Value/Ebitda16.92
Forecast
1Y Price Target
$571.29Price Target Upside35.12% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering38
EPS Forecast (FY)16.5
Revenue Forecast (FY)$327.57B
Microsoft Business Overview & Revenue Model
Company Description
Microsoft Corporation develops, licenses, and supports software, services, devices, and solutions worldwide. The company operates in three segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. The Productiv...
How the Company Makes Money
Microsoft primarily makes money by selling subscriptions, usage-based cloud services, software licensing, and related support/consulting, with additional revenue from devices, gaming, and advertising. Key revenue streams include: (1) Cloud service...
Microsoft Key Performance Indicators (KPIs)
Any
Cloud Revenue
Tracks revenue from cloud services, reflecting Microsoft's growth in a critical and expanding market segment.
Tracks revenue from cloud services, reflecting Microsoft's growth in a critical and expanding market segment.
Data provided by:
The Fly
The FlyMicrosoft Earnings Call Summary
Earnings Call Date:Jan 28, 2026
(Q2-2026)
| % Change Since: |
Next Earnings Date:Apr 29, 2026
Earnings Call Sentiment Positive
The call emphasized strong top-line growth, broad AI-driven product momentum (Microsoft Cloud, Copilots, Foundry/Fabric), significant silicon and data center advancements, and robust bookings and cash from operations. Key challenges include very high near-term capital spending focused on short-lived AI hardware, concentration of RPO with OpenAI that introduces volatility, margin pressure from AI investments, and weakness/impairments in gaming. On balance, the positive operational and financial momentum and clear AI adoption signals outweigh the risks called out by management.Positive Updates
Strong Microsoft Cloud Growth
Microsoft Cloud revenue surpassed $50 billion for the first time, totaling $51.5 billion and growing 26% year-over-year in constant currency; Microsoft Cloud gross margin was ~67% (slightly better than expected but down YoY due to AI investments).
Negative Updates
Very High Capital Expenditures and Short-Lived Asset Spend
Q2 capital expenditures were $37.5 billion (about two-thirds on short-lived assets like GPUs/CPUs). Cash paid for PP&E was $29.9 billion. Management acknowledged investor concerns about the pace of CapEx and emphasized balancing supply with rising demand—free cash flow was only $5.9 billion and decreased sequentially.
Read all updates
Q2-2026 Updates
Positive
Negative
Strong Microsoft Cloud Growth
Microsoft Cloud revenue surpassed $50 billion for the first time, totaling $51.5 billion and growing 26% year-over-year in constant currency; Microsoft Cloud gross margin was ~67% (slightly better than expected but down YoY due to AI investments).
Read all positive updates
Company Guidance
For Q3 Microsoft guided revenue of $80.65–$81.75 billion (growth 15–17%), COGS of $26.65–$26.85 billion (growth 22–23%), and operating expense of $17.8–$17.9 billion (growth 10–11%), with other income & expense (ex‑OpenAI) of roughly $700 million and an adjusted tax rate of ~19%; capital expenditures are expected to decrease sequentially with the short‑lived asset mix remaining similar to Q2. FX is expected to boost total revenue growth by ~3 points (productivity & business processes +4 pts; intelligent cloud +2 pts; more personal computing +2 pts) and to increase COGS and OpEx growth by ~2 points. Segment guidance: Productivity & Business Processes revenue $34.25–$34.55B (growth 14–15%) with Microsoft 365 commercial cloud growth 13–14% CC, Microsoft 365 commercial products down low single digits, Microsoft 365 consumer cloud mid‑to‑high‑20s, LinkedIn low double digits, and Dynamics 365 high teens; Intelligent Cloud $34.1–$34.4B (growth 27–29%) with Azure growth 37–38% CC and on‑prem server revenue down low single digits; More Personal Computing $12.3–$12.8B with Windows OEM revenue down roughly 10%, search & news advertising ex‑TAC high single‑digit growth, and Xbox content & services down mid single digits. Microsoft Cloud gross margin is expected to be ~65% (down year‑over‑year) and operating margins are expected to be slightly down in Q3 while FY‑26 operating margins are now expected to be up slightly.Microsoft Financial Statement Overview
Summary
Income Statement
95
Very Positive
Balance Sheet
92
Very Positive
Cash Flow
78
Positive
| Breakdown | TTM | Jun 2025 | Jun 2024 | Jun 2023 | Jun 2022 | Jun 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 305.45B | 281.72B | 245.12B | 211.91B | 198.27B | 168.09B |
| Gross Profit | 209.50B | 193.89B | 171.01B | 146.05B | 135.62B | 115.86B |
| EBITDA | 191.38B | 160.16B | 133.01B | 105.14B | 100.24B | 85.13B |
| Net Income | 119.26B | 101.83B | 88.14B | 72.36B | 72.74B | 61.27B |
Balance Sheet | ||||||
| Total Assets | 665.30B | 619.00B | 512.16B | 411.98B | 364.84B | 333.78B |
| Cash, Cash Equivalents and Short-Term Investments | 89.46B | 94.56B | 75.53B | 111.26B | 104.75B | 130.26B |
| Total Debt | 123.28B | 112.18B | 97.85B | 79.44B | 78.40B | 82.28B |
| Total Liabilities | 274.43B | 275.52B | 243.69B | 205.75B | 198.30B | 191.79B |
| Stockholders Equity | 390.88B | 343.48B | 268.48B | 206.22B | 166.54B | 141.99B |
Cash Flow | ||||||
| Free Cash Flow | 77.41B | 71.61B | 74.07B | 59.48B | 65.15B | 56.12B |
| Operating Cash Flow | 160.51B | 136.16B | 118.55B | 87.58B | 89.03B | 76.74B |
| Investing Cash Flow | -100.55B | -72.60B | -96.97B | -22.68B | -30.31B | -27.58B |
| Financing Cash Flow | -53.30B | -51.70B | -37.76B | -43.94B | -58.88B | -48.49B |
Microsoft Technical Analysis
Neutral
422.79
Price Trends
392.10
Positive
432.64
Negative
471.67
Negative
Market Momentum
1.19
Negative
70.73
Negative
95.84
Negative
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 422.79 is above the 20-day moving average (MA) of 378.24, above the 50-day MA of 392.10, and below the 200-day MA of 471.67, indicating a neutral trend. The MACD of 1.19 indicates Negative momentum. The RSI at 70.73 is Negative, neither overbought nor oversold. The STOCH value of 95.84 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for MSFT.
Microsoft Risk Analysis
Microsoft disclosed 23 risk factors in its most recent earnings report. Microsoft reported the most risks in the "Tech & Innovation" category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Microsoft Peers Comparison
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
80 Outperform | $3.91T | 23.95 | 159.94% | 0.41% | 10.07% | 25.58% | |
77 Outperform | $4.06T | 28.69 | 35.00% | 0.26% | 15.22% | 34.19% | |
75 Outperform | $98.89B | 14.24 | 62.31% | ― | 10.53% | 34.24% | |
74 Outperform | $3.05T | 23.36 | 33.61% | 0.71% | 16.67% | 28.60% | |
73 Outperform | $2.67T | 31.67 | 21.87% | ― | 11.48% | 50.70% | |
61 Neutral | $37.18B | 12.37 | -10.20% | 1.83% | 8.50% | -7.62% | |
57 Neutral | $488.38B | 27.89 | 57.35% | 1.00% | 11.08% | 29.56% |
* Technology Sector Average
MSFT
Microsoft
422.79
56.97
15.57%
ADBE
Adobe
244.45
-98.77
-28.78%
AMZN
Amazon
250.56
83.24
49.75%
AAPL
Apple
270.23
74.11
37.78%
GOOGL
Alphabet Class A
341.68
191.04
126.82%
ORCL
Oracle
175.06
47.72
37.47%
Glossary
BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.