Microsoft (MSFT) AI Stock Analysis

• Market Cap: $3.59T
• Dividend Yield: 0.71%
• Average Volume (3M): 24.45M
• Price to Earnings (P/E): 34.4
• Beta (1Y): 1.03
• 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: 23,454,280
• 30 Day Avg. Volume: 24,454,777
• 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: 1.08
• Enterprise Value/Revenue: 13.22
• Enterprise Value/Gross Profit: 19.23
• Enterprise Value/Ebitda: 22.86
• 1Y Price Target: $632.22
• Price Target Upside: 32.12% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 34
• EPS Forecast (FY): 16.1
• Revenue Forecast (FY): $326.41B

• Rating: 79 Outperform
• Price Target: $562.00 ▲(17.44% Upside)

Microsoft's strong financial performance and positive earnings call outlook are the most significant factors driving the score. While technical analysis shows mixed signals, the company's robust growth in cloud and AI segments, along with strategic investments, support a positive long-term outlook. Valuation reflects high growth expectations, balancing the overall score.

Positive Factors

Cloud Revenue Growth

Strong growth in cloud revenue indicates Microsoft's leading position in the cloud market, driven by robust demand and strategic investments in Azure and AI technologies.

AI Investment

Significant AI investment underscores Microsoft's commitment to innovation, enhancing its competitive edge and potential for long-term growth in AI-driven markets.

Financial Performance

Strong financial performance with substantial revenue and earnings growth reflects Microsoft's effective business strategy and operational efficiency, supporting future stability.

Negative Factors

Azure Capacity Constraints

Capacity constraints in Azure may limit Microsoft's ability to fully capitalize on cloud demand, potentially impacting growth and customer satisfaction in the near term.

Gaming Revenue Decline

A decline in gaming revenue suggests challenges in Microsoft's gaming segment, which could affect overall revenue diversification and growth if not addressed.

Leadership Change

Leadership changes can lead to strategic shifts and potential disruptions in governance, affecting Microsoft's long-term strategic direction and execution.

Microsoft Business Overview & Revenue Model

Company Description

Microsoft Corporation (MSFT) is a leading global technology company that develops, licenses, and supports a wide range of software products and services. Established in 1975, Microsoft operates primarily in the sectors of cloud computing, productivity software, personal computing, and gaming. Its core products include the Windows operating system, Microsoft Office suite, Azure cloud services, and Xbox gaming consoles, among others. The company aims to empower individuals and organizations through innovative technology solutions.

How the Company Makes Money

Microsoft generates revenue through several key streams. The largest portion comes from its cloud computing services, particularly through Azure, which has seen significant growth as businesses increasingly adopt cloud solutions. Additionally, Microsoft earns substantial revenue from its Office 365 subscription services, providing productivity tools to both consumers and enterprises. The company also generates income from Windows operating system licensing, hardware sales such as Surface devices, and gaming through Xbox consoles and related services. Partnerships with enterprises, educational institutions, and governmental organizations further enhance its revenue streams, as does its focus on integrating artificial intelligence and machine learning into its products, driving demand and usage across its platforms.

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: Negative
• Last Price: 478.53
• 50DMA: Negative
• 100DMA: Negative
• 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 Negative. The current price of 478.53 is below the 20-day moving average (MA) of 485.80, below the 50-day MA of 504.01, and above the 200-day MA of 470.46, indicating a neutral trend. The MACD of -5.97 indicates Negative momentum. The RSI at 41.65 is Neutral, neither overbought nor oversold. The STOCH value of 27.72 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for MSFT.

Microsoft Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
GOOGL	85 Outperform	$3.78T	30.82	35.45%	0.27%	13.55%	34.26%
ADBE	80 Outperform	$146.69B	21.34	55.43%	―	10.53%	34.24%
MSFT	79 Outperform	$3.59T	34.40	32.24%	0.71%	15.59%	15.89%
AAPL	79 Outperform	$4.11T	37.24	171.42%	0.37%	6.43%	22.85%
AMZN	71 Outperform	$2.46T	31.95	24.33%	―	11.48%	50.70%
ORCL	66 Neutral	$566.88B	37.37	70.60%	1.00%	11.08%	29.56%
Sector *	61 Neutral	$37.18B	12.37	-10.20%	1.83%	8.50%	-7.62%

Microsoft Corporate Events

Microsoft Shareholders Approve 2026 Stock Plan

On December 5, 2025, Microsoft held its Annual Shareholders Meeting where shareholders approved the 2026 Stock Plan, replacing the 2017 Stock Plan. The meeting also saw the re-election of 12 directors, approval of executive compensation, and the ratification of Deloitte & Touche LLP as the independent auditor for fiscal year 2026. Several shareholder proposals related to AI and human rights were not approved, indicating the company’s current strategic focus and shareholder priorities.

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.

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.