Microsoft Corporation MSFT
Microsoft remains a buy after FY2026 results confirmed that the massive AI capex cycle is translating into durable monetization: revenue grew 17.8% to $331.8B, EPS surged 31.6% to $17.95, and operating margin expanded to 46.78% from 45.62% the prior year. At 27.83x trailing earnings — roughly in line with the peer median PE of 27.35x but 18.4% below on EV/EBITDA at 18.45x versus 22.61x — the stock is not cheap but fairly valued against 31.6% EPS growth, with BofA recently raising its target to $600.
The principal tension is that capex nearly doubled to $115.9B, compressing FCF to $67.0B (20.19% margin versus 25.42% in FY2025) and pushing total debt to $128.8B, yet Q4 revenue of $90.0B growing 17.7% YoY suggests the investment is being absorbed by demand at scale. With the stock at $501.02 — well above its 50-day ($435.88) and 200-day ($431.12) moving averages and RSI at 63.7 — momentum is strong but extended after a roughly 30% post-earnings rally, warranting disciplined entry rather than chasing.
What could go wrong
- Capex outpacing FCF generation. Capex surged to $115.9B in FY2026 from $64.6B in FY2025, compressing FCF to $67.0B and FCF margin to 20.19% from 25.42%; if AI monetization slows, this spending could weigh on returns for years.
- OpenAI partnership risk. OpenAI's new Astra model reaching 'Critical' cybersecurity capability under its Preparedness Framework highlights growing deployment and governance risks that could complicate Microsoft's central AI strategy.
- Smart money and insider divergence. Smart money score has declined from 0.6165 (Q2 2025) to 0.1882 (Q2 2026), and insider net value over 24 months is -$376M despite net share accumulation of 106,583 shares, suggesting institutional conviction is cooling while the stock has rallied.
- Valuation stretched after 30% rally. At $501.02 the stock trades well above its 50-day and 200-day moving averages ($435.88 and $431.12) with MACD histogram negative at -1.62, indicating near-term exhaustion risk after a sharp post-earnings run.
What would change my mind
Where this comes from: FMP annual fundamentals, FY2026 (period ended 2026-06-30) · derived_metrics FY2026 + FMP annual fundamentals · derived_metrics FY2026 vs FY2025 · FMP annual fundamentals, FY2026. Orin's read on MSFT; not advice.
Twelve months actual closes to 2026-09-23 · actual filings
50-day average 200-day average · volume below
On file
All MSFT filingsLargest holders · 13F Q2 2026
Money flow| Filer | Position | Of fund |
|---|---|---|
| Vanguard Capital Management | $181.0B | 3.9% of fund |
| State Street | $117.7B | 3.5% of fund |
| Geode Capital Management | $70.6B | 3.8% of fund |
| Fmr | $69.4B | 3.0% of fund |
| Vanguard Portfolio Management | $62.8B | 2.8% of fund |
| Jpmorgan Chase & | $49.8B | 2.8% of fund |
304 filers · quarter ended Q2 2026 · positions, not flows
Insiders, last 24 months: 248 Form 4 filings, net −$440.3M. Of the 50 on hand, 0 were open-market purchases and 14 sales— the rest are grants, option exercises and tax withholding.
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Start 3 free days →Where it trades
| Metric | Now | Own median | Sector |
|---|---|---|---|
| P/E | 27.8× | 35.0× | 53.3× |
| EV/EBITDA | 18.4× | 24.5× | — |
| P/S | 11.20× | 12.16× | — |
| P/B | 8.4× | 12.3× | — |
Its P/E sits 20th percentile of its own last 5 years (−1.50σ from its own mean).
21.6%
free-cash-flow growth every year for 10 years, discounted at 10%, is what today’s price implies — starting from $67.0B of trailing free cash flow. It is an assumption the market is making, not a forecast Orin is making.
What Wall Street published
$556
$440 – $690 · +11% against today's price
- 66 buy or overweight
- 16 hold
- 0 underweight or sell
The analysts’ consensus and their own ratings, not Orin’s. A target is a twelve-month opinion published by the firm that wrote it.
Against the companies it is compared to
| Company | Market cap | P/E | EV/EBITDA | Gross | Net | ROE |
|---|---|---|---|---|---|---|
| MSFTMicrosoft Corporation | $3.72T | 27.8× | 18.4× | 67.9% | 40.3% | 33% |
| AAPLApple Inc. | $4.95T | 38.5× | 29.6× | 48.7% | 27.6% | 137% |
| DOCNDigitalOcean Holdings, Inc. | $17B | 56.0× | 46.1× | 57.2% | 23.3% | 55% |
| FTNTFortinet, Inc. | $131B | 62.5× | 44.5× | 80.4% | 28.2% | 188% |
| GDDYGoDaddy Inc. | $13B | 14.2× | 11.0× | 63.8% | 17.8% | 661% |
| GOOGLAlphabet Inc. | $4.09T | 16.6× | 12.7× | 60.9% | 54.8% | 51% |
| NVDANVIDIA Corporation | $5.47T | 28.4× | 23.5× | 74.7% | 63.7% | 110% |
| ORCLOracle Corporation | $416B | 22.3× | 14.2× | 63.9% | 26.4% | 43% |
The median is of the 7 peers listed above and nothing else — check it against the column. This company trades 2.0% below it. The peer set is the vendor’s, so a company can appear here that a person would not have chosen.
What it has traded at
What its sector has traded at
Two scales, drawn separately on purpose: a sector median and one company’s multiple are not the same number and putting them on one axis invites a comparison neither series supports.
Discounted cash flow
| Model | Fair value | Against | Computed |
|---|---|---|---|
| Standard DCF | $302 | $402.14 · −25% | 2026-06-10 |
| Levered DCF | $329 | $402.14 · −18% | 2026-06-10 |
The vendor’s intrinsic-value models. Treat them as a low-growth anchor — for a fast grower the market routinely pays well above a DCF. These were computed against the price in the “against” column, not today’s.
Every estimate on one scale
The vertical rule is the current price. Ranges and point estimates are the backend’s, published as they were calculated; an arrow means the estimate sits beyond this scale, and its number is on the right.