AI Multi-Horizon Analysis
Short-term70% confidence
Bearish
Daily chart is overbought (RSI-14 84.8) with price 9.9% below session high and volume below 20-day average; momentum likely to fade intraday.
Mid-term60% confidence
Neutral
Price is consolidating after a sharp drop from 553.72; MACD remains positive but the overbought condition and insider selling create a mixed near-term setup.
Long-term80% confidence
Bullish
Revenue and equity base are expanding, leverage is low, and the firm generates substantial FCF despite capex growth; margin compression is the key watch-item.
Overall AI View65% confidence
Bullish
MSFT shows accelerating revenue and strong operating cash flow in the latest implied quarter, with low and declining leverage; however, gross and operating margins are compressing, and heavy capex is eroding free-cash-flow margins.
Detailed AI Fundamental Analysis
Business Snapshot
- Ticker: MSFT (Microsoft Corp), common stock, listed on NASDAQ since 1986-03-13. CIK 0000789019.
- The data payload does not include a sector/industry or segment breakdown, but the reported financials describe a large-scale, high-margin enterprise software/platform business with ~68% gross margins, ~$331.8B annual revenue, and ~$67.0B annual free cash flow.
- The latest reporting period is a 10-K for fiscal year ended 2026-06-30. The other three periods are 10-Q filings for quarters ending 2025-09-30, 2025-12-31, and 2026-03-31. I infer an implied Q4 FY26 quarter from the annual figure minus the three reported quarters.
Financial Trends
Revenue
- Reported quarterly revenue trend:
- 2025-09-30: $77.673B
- 2025-12-31: $81.273B — +4.6% QoQ
- 2026-03-31: $82.886B — +2.0% QoQ
- Implied Q4 FY26: $90.007B — +8.6% QoQ, the strongest quarter in the sequence
- Full-year FY26 revenue: $331.839B, calculated as the first three reported quarters + implied Q4.
- Revenue is accelerating in the most recent implied quarter.
Margins
- Gross margin by period:
- Q1 FY26: 69.05%
- Q2 FY26: 68.04%
- Q3 FY26: 67.63%
- Implied Q4 FY26: ~67.2%
- Trajectory: declining, down roughly ~190 bps over the four periods.
- Operating income margin:
- Q1: 48.87%
- Q2: 47.09%
- Q3: 46.33%
- Implied Q4: ~45.1%
- Trajectory: steadily declining.
- Operating expenses as a % of revenue rose from ~20.2% in Q1 to ~22.1% in implied Q4 — operating leverage is going the wrong way.
- Net margin is lumpy:
- Q1: 35.72%
- Q2: 47.32%
- Q3: 38.34%
- Implied Q4: ~39.7%
- Full-year FY26 net margin: 40.31%.
- Q2 net margin likely includes a non-operating benefit; the data does not explain it.
Earnings
- Diluted EPS by quarter:
- Q1: $3.72
- Q2: $5.16
- Q3: $4.27
- Implied Q4: ~$4.80 (+12.4% QoQ)
- Full-year diluted EPS: $17.95.
- Basic EPS: $18.00.
Cash Flow / FCF
- Operating cash flow by quarter:
- Q1: $45.057B
- Q2: $35.758B
- Q3: $46.679B
- Implied Q4: $55.441B — strongest of the four.
- Capital expenditures by quarter:
- Q1: $19.394B
- Q2: $29.876B (+54.0% QoQ)
- Q3: $30.876B (+3.3% QoQ)
- Implied Q4: $35.802B (+16.0% QoQ)
- Q4 capex was +84.6% vs Q1, a major acceleration.
- Free cash flow by quarter:
- Q1: $25.663B
- Q2: $5.882B
- Q3: $15.803B
- Implied Q4: $19.639B (+24.3% QoQ but -23.5% vs Q1)
- Full-year FCF: $66.987B, but the FCF margin compressed from ~33.0% in Q1 to ~21.8% in implied Q4 — capex is absorbing more cash flow.
Balance Sheet
- Total assets:
- 2025-09-30: $636.351B
- 2026-06-30: $758.376B — +19.2% over four periods
- Shareholders’ equity:
- $363.076B → $442.387B — +21.8% over four periods
- Total liabilities:
- $273.275B → $315.989B — +15.6% over four periods
- Equity growth is outpacing liability growth.
- Cash & ST investments:
- $102.012B → $76.843B — -24.7% over four periods
- Cash & equivalents alone:
- $28.849B → $20.935B — down sharply in the implied Q4.
- Long-term debt:
- $35.376B → $31.067B — down 12.2%.
- Debt / Equity:
- 0.10 → 0.07 — leverage is low and falling.
- Current ratio:
- 1.40 → 1.23 — declining, though still above 1.0.
- Working capital:
- $54.070B → $38.885B — down 28.1% over the four periods, but roughly flat QoQ at the end ($
