SuperworthMicrosoft Corporation MSFT
- Market cap
- $3.9T
- PE
- 29.5×
- 10y median 33.1×
- Forward PE
- Price to sales
- 11.9×
- EV/EBIT
- 25.1×
- Revenue, 12 months
- $331.8B
- +18% on a year ago
- Net margin
- 40.3%
- Free cash flow yield
- 1.7%
Cheaper on earnings, pricier on cash
Earnings keep rising while free cash flow falls. The gap is the AI build-out, and today's price assumes it pays off.
Earnings kept compounding
Earnings per share over the last twelve months rose from 10.33 dollars in September 2023 to 17.95. Part of that latest figure is net gains on Microsoft's investment in OpenAI. Its adjusted figure, which leaves them out, is 17.28, still up about two thirds. Nothing in the profit line suggests a business in trouble.
But the stock is where it was a year ago
Market value is about 3.9 trillion dollars, level with a year ago and just below its October 2025 high, while earnings kept rising. In between it fell to 2.6 trillion in June 2026, then climbed about 50%.
So the PE sits below its usual level
The PE, the price divided by the last year's reported earnings per share, is about 30. With the price flat and earnings up, it is below its three year median of 35, and cheaper than about seven in ten days of the last ten years.
Cash flow fell while profit rose
Free cash flow, the cash left after capital spending, peaked at 78 billion dollars a year in September 2025 and is 67 billion now. Capital spending on data centres and their chips rose 80% in a year, to 116 billion. It leaves cash at once but reaches profit only slowly, through depreciation.
On cash, the priciest in ten years
Price to free cash flow, the price divided by free cash flow per share, is about 59, its highest in ten years. The PE and this multiple are both right. The gap between them is the capital being spent, and more is coming. In September Microsoft committed over 10 billion dollars to cloud and AI in four Gulf states through 2030.
Margins tell the same story
Gross margin is 67.9%, down from 69.9% in April 2024. Running AI infrastructure costs more per dollar of revenue than licensing software did. Operating margin, what is left after all running costs, is 46.8%, a ten year high. Profit is strong. The cost shows up in cash.
The price needs the build-out to pay
Azure, Microsoft's cloud, grew 43% in the June quarter. Analysts expect sales of 408 billion dollars and adjusted earnings per share of 20.46 in the four quarters to September 2027. The next report, expected on 28 October, is the first under new segments that put a dollar figure on Azure. If free cash flow climbs back while Azure grows, the PE was the better guide. If it keeps falling, the cash multiple was.
What has happened lately
- Microsoft, Microsoft commits more than $10 billion to cloud and AI infrastructure in four Gulf states through 2030Over $10B of capital and operating spending in Kuwait, Qatar, Saudi Arabia and the UAE, plus $400M+ for connectivity, adds to the capex and depreciation path.
- Microsoft, Microsoft raises quarterly dividend 8% to $0.98 per shareRaises the annual payout while capital spending runs at record levels, which shows how much cash goes back to shareholders versus into the build-out.
- SEC, Microsoft moves to two reporting segments and will disclose Azure revenue in dollars from FY27Ends Azure's growth-rate-only reporting and redraws the segment lines, which changes the inputs available for modelling and peer comparison.
- Microsoft, Microsoft Q4 FY26: revenue $90.0B, up 18%, with Azure up 43% and past $100B for the yearSets the base for cloud growth, segment margins and EPS, with Azure annual revenue crossing $100 billion for the first time.
Headlines link to the original source.
Charts
Financials
| Income statement | Q2 FY24 | Q3 FY24 | Q4 FY24 | Q1 FY25 | Q2 FY25 | Q3 FY25 | Q4 FY25 | Q1 FY26 | Q2 FY26 | Q3 FY26 | Q4 FY26 |
|---|---|---|---|---|---|---|---|---|---|---|---|
| $62B | $61.9B | $64.7B | $65.6B | $69.6B+12% | $70.1B+13% | $76.4B+18% | $77.7B+18% | $81.3B+17% | $82.9B+18% | $90B+18% | |
| Cost of revenue | $19.6B | $18.5B | $19.7B | $20.1B | $21.8B+11% | $21.9B+18% | $24B+22% | $24B+20% | $26B+19% | $26.8B+22% | $29.5B+23% |
| Gross profit | $42.4B | $43.4B | $45B | $45.5B | $47.8B+13% | $48.1B+11% | $52.4B+16% | $53.6B+18% | $55.3B+16% | $56.1B+16% | $60.5B+15% |
| R&D | $7.1B | $7.7B | $8.1B | $7.5B | $7.9B+11% | $8.2B+7% | $8.8B+10% | $8.1B+8% | $8.5B+7% | $8.9B+9% | $10B+13% |
| SG&A | $8.2B | $8.1B | $9.1B | $7.4B | $8.3B+1% | $7.9B−2% | $9.3B+2% | $7.5B+2% | $8.5B+3% | $8.7B+10% | $9.9B+7% |
| $27B | $27.6B | $27.9B | $30.6B | $31.7B+17% | $32B+16% | $34.3B+23% | $38B+24% | $38.3B+21% | $38.4B+20% | $40.6B+18% | |
| Interest expense | $909M | $800M | $701M | $582M | $594M−35% | $594M−26% | $615M−12% | $698M+20% | $736M+24% | $778M+31% | $839M+36% |
| Pre-tax income | $26.5B | $26.7B | $27.3B | $30.3B | $29.4B+11% | $31.4B+17% | $32.6B+20% | $34.3B+13% | $48.2B+64% | $39.3B+25% | $44B+35% |
| $4.7B | $4.8B | $5.2B | $5.6B | $5.3B+13% | $5.6B+16% | $5.4B+3% | $6.6B+17% | $9.8B+86% | $7.6B+36% | $8.3B+54% | |
| Net income | $21.9B | $21.9B | $22B | $24.7B | $24.1B+10% | $25.8B+18% | $27.2B+24% | $27.7B+13% | $38.5B+60% | $31.8B+23% | $35.8B+31% |
| $2.93 | $2.94 | $2.95 | $3.30 | $3.23+10% | $3.46+18% | $3.65+24% | $3.72+13% | $5.16+60% | $4.27+23% | $4.80+32% | |
| 7.5B | 7.5B | 7.5B | 7.5B | 7.5B+0% | 7.5B−0% | 7.5B−0% | 7.5B−0% | 7.5B−0% | 7.4B−0% | 7.5B−0% |
From each company's 10-Q and 10-K filings. Fiscal years are four fiscal quarters added up; balance sheet lines are as of the period's end. Growth is on the same period a year earlier.
Estimates
Next earnings report: .
Analyst consensus for the next eight quarters, with the range from the lowest to the highest estimate, is part of Superworth Pro.
Peers
Companies in Technology within ten times Microsoft's size, closest in size first.
| Company | Market cap | PE | Its 10y median PE | Fwd PE | P/S | Revenue growth | Net margin |
|---|---|---|---|---|---|---|---|
| MSFTMicrosoft Corporation | $3.9T | 29.5× | 33.1× | 11.9× | +18% | 40.3% | |
| AAPLApple Inc. | $4.9T | 38.6× | 27.8× | 10.5× | +14% | 27.6% | |
| NVDANVIDIA Corporation | $5.7T | 30.0× | 53.9× | 18.9× | +83% | 63.7% | |
| AVGOBroadcom Inc. | $1.8T | 48.1× | 44.4× | 20.2× | +49% | 42.9% | |
| MUMicron Technology, Inc. | $1.2T | 14.7× | 17.4× | 9.2× | +256% | 63.8% | |
| AMDAdvanced Micro Devices, Inc. | $1.1T | 166× | 109× | 25.5× | +40% | 15.6% | |
| PLTRPalantir Technologies Inc. | $466.5B | 166× | 372× | 75.8× | +79% | 49.0% | |
| CSCOCisco Systems, Inc. | $462.8B | 35.1× | 18.8× | 7.3× | +12% | 21.0% | |
| ORCLOracle Corporation | $434.1B | 22.5× | 27.5× | 6.0× | +22% | 26.4% | |
| AMATApplied Materials, Inc. | $413.2B | 44.9× | 19.7× | 13.4× | +8% | 30.1% | |
| LRCXLam Research Corporation | $412.3B | 57.2× | 21.0× | 17.7× | +26% | 31.3% | |
| Peer median | $760.4B | 41.7× | 27.7× | 15.6× | +33% | 30.7% |
About
- Chief executive
- Satya Nadella, since 2014Joined 1992, CEO since 2014.
- Industry
- Software - Infrastructure
- Sector
- Technology
Valuation data, not investment advice. Prices as of .