Is It Too Late To Buy Microsoft Stock After Its Summer Run?

Microsoft (MSFT) stock is up about 30% in three months, including a 19% jump in the two trading days after its July report. That makes buying now feel late. Yet the stock is slightly lower than a year ago, while the S&P 500 (SPY) gained about 17%. With the stock trading near $500 a share, Wall Street consensus is already banking on Microsoft beating its own forecast again.

How Expensive Is Microsoft Stock After The Run?

On earnings, it looks fair. Microsoft trades at about 27 times its profits over the past year, below its three-year average of about 32 times. But those profits rest on a net margin of about 40%, the highest in at least five years. A lower multiple on peak margins is fair rather than cheap.

On cash, it looks expensive. Microsoft spent about $116 billion on capital projects over the past year, nearly double the year before. Free cash flow slipped to $67.0 billion, from $71.6 billion. As a rough illustration, a company worth about $3.67 trillion costs roughly 55 times that cash.

The spending buys capacity Microsoft still lacks. Azure demand exceeds available capacity, and Azure and other cloud services revenue grew 43% in fiscal Q4 2026. Management guides fiscal Q1 2027 capital spending to over $50 billion, a figure that already reflects some data center leases moving out of capital spending.

Is Microsoft Expected To Beat Its Own Forecast Again?

It is. Microsoft’s guide for fiscal Q1 2027 revenue runs from a low of $89.85 billion to a high of $90.95 billion. With consensus hovering at $90.66 billion, the market isn’t pricing in an immediate blowout above guidance—but it is demanding that Microsoft execute toward the very top of its target range.

Microsoft has cleared that kind of bar before. In April its guide for fiscal Q4 2026 revenue topped out at $87.8 billion, and actual revenue came in at $90 billion. By management’s account, Azure beat because efficiency gains and earlier delivery freed up capacity that sold at once. Windows OEM also beat, as PC makers and channel partners stocked up while component prices rose.

That second lift is not in the new guide. Management expects Windows OEM and Devices revenue to decline by a percentage in the low 20s in fiscal Q1 2027. That leaves the beat mainly to Azure, where management expects growth to accelerate in the first half of fiscal 2027.

Can Microsoft Clear That Bar In Its October Report?

The next test is the report expected on or around October 27, covering fiscal Q1 2027. Microsoft’s report days cut both ways. The stock jumped after July’s report but fell about 11% in the two trading days after January’s.

If Azure capacity keeps arriving early, another beat is within reach. If revenue lands only within management’s guidance range, it may fall short of aggressive expectations that some traders have priced in. Over the past three years, the stock’s largest peak-to-trough fall was about 34%.

Buying now suits only someone who could hold through a fall like that. For a wider view, see which companies keep raising their own forecasts.

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