Microsoft (MSFT)
Market Price (3/15/2026): $395.03 | Market Cap: $2.9 TrilSector: Information Technology | Industry: Systems Software
Microsoft (MSFT)
Market Price (3/15/2026): $395.03Market Cap: $2.9 TrilSector: Information TechnologyIndustry: Systems Software
Investment Highlights Why It Matters Detailed financial logic regarding cash flow yields vs trend-riding momentum.
| Attractive operating marginsOp Mgn LTMOperating Margin = Operating Income / Revenue Reflects profitability before taxes and before impact of capital structure (interest payments). is 47% | Weak multi-year price returns2Y Excs Rtn is -33%, 3Y Excs Rtn is -10% | |
| Attractive cash flow generationCFO/Rev LTMCash Flow from Operations / Revenue (Sales), Last Twelve Months (LTM) is 53%, FCF/Rev LTMFree Cash Flow / Revenue (Sales), Last Twelve Months (LTM) is 25%, CFO LTM is 161 Bil, FCF LTM is 77 Bil | ||
| Valuation becoming less expensiveP/S 6M Chg %Price/Sales change over 6 months. Declining P/S indicates valuation has become less expensive. is -27% | ||
| Low stock price volatilityVol 12M is 26% | ||
| Megatrend and thematic driversMegatrends include Artificial Intelligence, Cloud Computing, Cybersecurity, Digital Content & Streaming, Show more. |
| Attractive operating marginsOp Mgn LTMOperating Margin = Operating Income / Revenue Reflects profitability before taxes and before impact of capital structure (interest payments). is 47% |
| Attractive cash flow generationCFO/Rev LTMCash Flow from Operations / Revenue (Sales), Last Twelve Months (LTM) is 53%, FCF/Rev LTMFree Cash Flow / Revenue (Sales), Last Twelve Months (LTM) is 25%, CFO LTM is 161 Bil, FCF LTM is 77 Bil |
| Valuation becoming less expensiveP/S 6M Chg %Price/Sales change over 6 months. Declining P/S indicates valuation has become less expensive. is -27% |
| Low stock price volatilityVol 12M is 26% |
| Megatrend and thematic driversMegatrends include Artificial Intelligence, Cloud Computing, Cybersecurity, Digital Content & Streaming, Show more. |
| Weak multi-year price returns2Y Excs Rtn is -33%, 3Y Excs Rtn is -10% |
Qualitative Assessment
AI Analysis | Feedback
Microsoft (MSFT) stock has lost about 20% since 11/30/2025 because of the following key factors:
1. Negative Market Reaction to Q2 FY2026 Earnings Despite Beat, Driven by OpenAI Exposure.
Microsoft's stock declined 10.0% on January 29, 2026, closing at $432.51, despite reporting Q2 FY2026 earnings per share of $4.14 and revenue of $81.27 billion, both surpassing analyst estimates of $3.86 and $80.28 billion, respectively. This sharp decline was notably influenced by growing investor concerns regarding the company's substantial investments in artificial intelligence and the revelation that up to 45% of its backlog is tied to OpenAI, especially with reports of OpenAI's projected $14 billion loss in 2026.
2. Significant Executive Insider Selling.
Key Microsoft executives engaged in substantial stock sales during the period. Judson Althoff (CEO Microsoft Commercial) sold shares valued at approximately $6.3 million on December 2, 2025. Additionally, Bradford L. Smith (Vice Chair and President) executed sales totaling around $20.2 million on November 3, 2025. This collective insider selling indicated reduced confidence from top leadership.
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1. Negative Market Reaction to Q2 FY2026 Earnings Despite Beat, Driven by OpenAI Exposure.
Microsoft's stock declined 10.0% on January 29, 2026, closing at $432.51, despite reporting Q2 FY2026 earnings per share of $4.14 and revenue of $81.27 billion, both surpassing analyst estimates of $3.86 and $80.28 billion, respectively. This sharp decline was notably influenced by growing investor concerns regarding the company's substantial investments in artificial intelligence and the revelation that up to 45% of its backlog is tied to OpenAI, especially with reports of OpenAI's projected $14 billion loss in 2026.
2. Significant Executive Insider Selling.
Key Microsoft executives engaged in substantial stock sales during the period. Judson Althoff (CEO Microsoft Commercial) sold shares valued at approximately $6.3 million on December 2, 2025. Additionally, Bradford L. Smith (Vice Chair and President) executed sales totaling around $20.2 million on November 3, 2025. This collective insider selling indicated reduced confidence from top leadership.
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Stock Movement Drivers
Fundamental Drivers
The -19.4% change in MSFT stock from 11/30/2025 to 3/13/2026 was primarily driven by a -29.1% change in the company's P/E Multiple.| (LTM values as of) | 11302025 | 3132026 | Change |
|---|---|---|---|
| Stock Price ($) | 490.89 | 395.55 | -19.4% |
| Change Contribution By: | |||
| Total Revenues ($ Mil) | 293,812 | 305,453 | 4.0% |
| Net Income Margin (%) | 35.7% | 39.0% | 9.3% |
| P/E Multiple | 34.8 | 24.6 | -29.1% |
| Shares Outstanding (Mil) | 7,433 | 7,431 | 0.0% |
| Cumulative Contribution | -19.4% |
Market Drivers
11/30/2025 to 3/13/2026| Return | Correlation | |
|---|---|---|
| MSFT | -19.4% | |
| Market (SPY) | -3.1% | 30.5% |
| Sector (XLK) | -4.4% | 44.9% |
Fundamental Drivers
The -21.6% change in MSFT stock from 8/31/2025 to 3/13/2026 was primarily driven by a -33.1% change in the company's P/E Multiple.| (LTM values as of) | 8312025 | 3132026 | Change |
|---|---|---|---|
| Stock Price ($) | 504.59 | 395.55 | -21.6% |
| Change Contribution By: | |||
| Total Revenues ($ Mil) | 281,724 | 305,453 | 8.4% |
| Net Income Margin (%) | 36.1% | 39.0% | 8.0% |
| P/E Multiple | 36.8 | 24.6 | -33.1% |
| Shares Outstanding (Mil) | 7,430 | 7,431 | 0.0% |
| Cumulative Contribution | -21.6% |
Market Drivers
8/31/2025 to 3/13/2026| Return | Correlation | |
|---|---|---|
| MSFT | -21.6% | |
| Market (SPY) | 3.0% | 40.5% |
| Sector (XLK) | 4.4% | 48.6% |
Fundamental Drivers
The 0.4% change in MSFT stock from 2/28/2025 to 3/13/2026 was primarily driven by a 16.7% change in the company's Total Revenues ($ Mil).| (LTM values as of) | 2282025 | 3132026 | Change |
|---|---|---|---|
| Stock Price ($) | 393.97 | 395.55 | 0.4% |
| Change Contribution By: | |||
| Total Revenues ($ Mil) | 261,802 | 305,453 | 16.7% |
| Net Income Margin (%) | 35.4% | 39.0% | 10.2% |
| P/E Multiple | 31.6 | 24.6 | -22.0% |
| Shares Outstanding (Mil) | 7,435 | 7,431 | 0.1% |
| Cumulative Contribution | 0.4% |
Market Drivers
2/28/2025 to 3/13/2026| Return | Correlation | |
|---|---|---|
| MSFT | 0.4% | |
| Market (SPY) | 12.4% | 63.3% |
| Sector (XLK) | 21.9% | 67.4% |
Fundamental Drivers
The 62.3% change in MSFT stock from 2/28/2023 to 3/13/2026 was primarily driven by a 49.7% change in the company's Total Revenues ($ Mil).| (LTM values as of) | 2282023 | 3132026 | Change |
|---|---|---|---|
| Stock Price ($) | 243.65 | 395.55 | 62.3% |
| Change Contribution By: | |||
| Total Revenues ($ Mil) | 204,094 | 305,453 | 49.7% |
| Net Income Margin (%) | 33.0% | 39.0% | 18.1% |
| P/E Multiple | 26.9 | 24.6 | -8.4% |
| Shares Outstanding (Mil) | 7,451 | 7,431 | 0.3% |
| Cumulative Contribution | 62.3% |
Market Drivers
2/28/2023 to 3/13/2026| Return | Correlation | |
|---|---|---|
| MSFT | 62.3% | |
| Market (SPY) | 73.4% | 63.4% |
| Sector (XLK) | 104.5% | 70.9% |
Price Returns Compared
| 2021 | 2022 | 2023 | 2024 | 2025 | 2026 | Total [1] | |
|---|---|---|---|---|---|---|---|
| Returns | |||||||
| MSFT Return | 52% | -28% | 58% | 13% | 16% | -16% | 90% |
| Peers Return | 31% | -34% | 64% | 40% | 16% | -11% | 104% |
| S&P 500 Return | 27% | -19% | 24% | 23% | 16% | -1% | 80% |
Monthly Win Rates [3] | |||||||
| MSFT Win Rate | 75% | 25% | 67% | 58% | 42% | 33% | |
| Peers Win Rate | 63% | 28% | 67% | 65% | 53% | 33% | |
| S&P 500 Win Rate | 75% | 42% | 67% | 75% | 67% | 33% | |
Max Drawdowns [4] | |||||||
| MSFT Max Drawdown | -5% | -36% | -7% | -2% | -16% | -20% | |
| Peers Max Drawdown | -7% | -40% | -1% | -9% | -27% | -18% | |
| S&P 500 Max Drawdown | -1% | -25% | -1% | -2% | -15% | -2% | |
[1] Cumulative total returns since the beginning of 2021
[2] Peers: GOOGL, AMZN, AAPL, ORCL, CRM. See MSFT Returns vs. Peers.
[3] Win Rate = % of calendar months in which monthly returns were positive
[4] Max drawdown represents maximum peak-to-trough decline within a year
[5] 2026 data is for the year up to 3/13/2026 (YTD)
How Low Can It Go
| Event | MSFT | S&P 500 |
|---|---|---|
| 2022 Inflation Shock | ||
| % Loss | -37.6% | -25.4% |
| % Gain to Breakeven | 60.1% | 34.1% |
| Time to Breakeven | 224 days | 464 days |
| 2020 Covid Pandemic | ||
| % Loss | -28.2% | -33.9% |
| % Gain to Breakeven | 39.3% | 51.3% |
| Time to Breakeven | 85 days | 148 days |
| 2018 Correction | ||
| % Loss | -18.6% | -19.8% |
| % Gain to Breakeven | 22.8% | 24.7% |
| Time to Breakeven | 81 days | 120 days |
| 2008 Global Financial Crisis | ||
| % Loss | -59.1% | -56.8% |
| % Gain to Breakeven | 144.6% | 131.3% |
| Time to Breakeven | 1,703 days | 1,480 days |
Compare to GOOGL, AMZN, AAPL, ORCL, CRM
In The Past
Microsoft's stock fell -37.6% during the 2022 Inflation Shock from a high on 11/19/2021. A -37.6% loss requires a 60.1% gain to breakeven.
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About Microsoft (MSFT)
Microsoft Corporation develops, licenses, and supports software, services, devices, and solutions worldwide. Its Productivity and Business Processes segment offers Office, Exchange, SharePoint, Microsoft Teams, Office 365 Security and Compliance, and Skype for Business, as well as related Client Access Licenses (CAL); Skype, Outlook.com, OneDrive, and LinkedIn; and Dynamics 365, a set of cloud-based and on-premises business solutions for organizations and enterprise divisions. Its Intelligent Cloud segment licenses SQL, Windows Servers, Visual Studio, System Center, and related CALs; GitHub that provides a collaboration platform and code hosting service for developers; and Azure, a cloud platform. It also offers support services and Microsoft consulting services to assist customers in developing, deploying, and managing Microsoft server and desktop solutions; and training and certification on Microsoft products. Its More Personal Computing segment provides Windows original equipment manufacturer (OEM) licensing and other non-volume licensing of the Windows operating system; Windows Commercial, such as volume licensing of the Windows operating system, Windows cloud services, and other Windows commercial offerings; patent licensing; Windows Internet of Things; and MSN advertising. It also offers Surface, PC accessories, PCs, tablets, gaming and entertainment consoles, and other devices; Gaming, including Xbox hardware, and Xbox content and services; video games and third-party video game royalties; and Search, including Bing and Microsoft advertising. It sells its products through OEMs, distributors, and resellers; and directly through digital marketplaces, online stores, and retail stores. It has collaborations with Dynatrace, Inc., Morgan Stanley, Micro Focus, WPP plc, ACI Worldwide, Inc., and iCIMS, Inc., as well as strategic relationships with Avaya Holdings Corp. and wejo Limited. Microsoft Corporation was founded in 1975 and is based in Redmond, Washington.
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- Imagine Amazon Web Services (AWS) for cloud computing, combined with the business software offerings of Google Workspace.
- Think of it as Apple, but with a much stronger focus on enterprise software and cloud services, and a major gaming console business like Sony PlayStation.
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- Microsoft Office Suite: A collection of productivity applications like Word, Excel, PowerPoint, Outlook, and communication tools such as Teams.
- Microsoft Dynamics 365: A suite of cloud-based business applications for enterprise resource planning (ERP) and customer relationship management (CRM).
- Microsoft Azure: A comprehensive cloud computing platform offering a wide range of services including computing, analytics, storage, and networking.
- Windows Operating System: The widely used operating system for personal computers, servers, and IoT devices.
- Xbox: A brand of gaming consoles, games, and online services.
- Surface Devices: A line of personal computers, tablets, and accessories designed and manufactured by Microsoft.
- LinkedIn: A professional networking platform and employment-oriented service.
- GitHub: A web-based platform for version control and collaboration on software development projects using Git.
- Microsoft Servers & Developer Tools: Software products like SQL Server, Windows Server, and Visual Studio for businesses and developers.
- Bing & Microsoft Advertising: A web search engine and its associated advertising services.
- Microsoft Consulting & Support Services: Professional services including technical support, consulting, training, and certification for Microsoft products.
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Microsoft (MSFT) primarily sells its software, services, and solutions to **other companies and organizations** worldwide. While it also serves individual consumers with products like Xbox, Surface, and consumer versions of Windows and Office, the description heavily emphasizes its B2B offerings, including enterprise solutions, cloud platforms, server software, and developer tools. Given the global reach and diverse product portfolio of Microsoft, it serves millions of businesses across virtually all industries. While the background description does not list a comprehensive set of specific major customer companies by name for all its offerings, it does indicate key types of business customers and mentions several companies with whom it has collaborations or strategic relationships, which are highly likely to be significant customers of its enterprise products. Based on the information provided, major customers include: * **Original Equipment Manufacturers (OEMs)**: These companies license Windows and other Microsoft software for pre-installation on the PCs, tablets, and other devices they manufacture. Examples of major public OEMs include: * **HP Inc.** (HPQ) * **Dell Technologies Inc.** (DELL) * **Large Enterprises and Financial Institutions**: Companies that utilize Microsoft's extensive suite of enterprise software, cloud services (Azure), productivity tools (Office 365), and business solutions (Dynamics 365). Examples of public companies mentioned in the background with "collaborations" or "strategic relationships" that are highly likely to be major customers in this category include: * **Morgan Stanley** (MS) * **WPP plc** (WPP) * **Dynatrace, Inc.** (DT) * **ACI Worldwide, Inc.** (ACI)AI Analysis | Feedback
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Clear Emerging Threats to Microsoft (MSFT):
- Rise of Alternative Operating Systems: The increasing market penetration and adoption of operating systems like Google's Chrome OS, particularly in the education and budget-friendly PC markets, directly challenges Microsoft's dominance in Windows OEM licensing. Furthermore, Apple's macOS, especially with the performance advancements of Apple Silicon, continues to solidify its position as a compelling alternative to Windows for consumers and professionals, eroding Microsoft's market share in the premium PC segment. This trend poses a clear threat to Windows' foundational role and revenue.
- Proliferation of Best-of-Breed Specialized SaaS Solutions: While Microsoft offers comprehensive integrated suites (e.g., Office 365, Dynamics 365), there is an ongoing trend of enterprises adopting specialized, best-of-breed SaaS applications from various vendors for specific functions (e.g., Salesforce for CRM, Slack for communication, Zoom for video conferencing, Figma for design, Miro for collaboration). These specialized solutions often offer deeper features or more innovative user experiences within their niche, challenging the "all-in-one" appeal of Microsoft's offerings and potentially fragmenting its ecosystem. This can erode market share for individual components within Microsoft's productivity and business processes segments.
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Latest Trefis Analyses
Trade Ideas
Select ideas related to MSFT.
| Date | Ticker | Company | Category | Trade Strategy | 6M Fwd Rtn | 12M Fwd Rtn | 12M Max DD |
|---|---|---|---|---|---|---|---|
| 02282026 | BMI | Badger Meter | Insider | Insider Buys 45DStrong Insider BuyingCompanies with multiple insider buys in the last 45 days | 0.0% | 0.0% | 0.0% |
| 02282026 | VRNS | Varonis Systems | Insider | Insider Buys 45DStrong Insider BuyingCompanies with multiple insider buys in the last 45 days | 0.0% | 0.0% | 0.0% |
| 02272026 | ITRI | Itron | Dip Buy | DB | FCFY OPMDip Buy with High FCF Yield and High MarginBuying dips for companies with high FCF yield and meaningfully high operating margin | 0.0% | 0.0% | 0.0% |
| 02272026 | FSLR | First Solar | Dip Buy | DB | P/E OPMDip Buy with Low PE and High MarginBuying dips for companies with tame PE and meaningfully high operating margin | 0.0% | 0.0% | 0.0% |
| 02272026 | PEGA | Pegasystems | Dip Buy | DB | P/E OPMDip Buy with Low PE and High MarginBuying dips for companies with tame PE and meaningfully high operating margin | 0.0% | 0.0% | 0.0% |
| 02202026 | MSFT | Microsoft | Insider | Insider Buys | Low D/EStrong Insider BuyingCompanies with strong insider buying in the last 1 month, positive operating income and reasonable debt / market cap | -1.1% | -1.1% | -3.2% |
| 03312021 | MSFT | Microsoft | Insider | Insider Buys | Low D/EStrong Insider BuyingCompanies with strong insider buying in the last 1 month, positive operating income and reasonable debt / market cap | 21.0% | 31.8% | 0.0% |
Research & Analysis
Invest in Strategies
Wealth Management
Peer Comparisons
| Peers to compare with: |
Financials
| Median | |
|---|---|
| Name | |
| Mkt Price | 228.89 |
| Mkt Cap | 2,581.7 |
| Rev LTM | 354,145 |
| Op Inc LTM | 104,507 |
| FCF LTM | 43,834 |
| FCF 3Y Avg | 47,946 |
| CFO LTM | 137,493 |
| CFO 3Y Avg | 116,756 |
Growth & Margins
| Median | |
|---|---|
| Name | |
| Rev Chg LTM | 11.7% |
| Rev Chg 3Y Avg | 10.8% |
| Rev Chg Q | 14.9% |
| QoQ Delta Rev Chg LTM | 3.8% |
| Op Mgn LTM | 32.0% |
| Op Mgn 3Y Avg | 30.6% |
| QoQ Delta Op Mgn LTM | 0.2% |
| CFO/Rev LTM | 36.3% |
| CFO/Rev 3Y Avg | 34.4% |
| FCF/Rev LTM | 21.8% |
| FCF/Rev 3Y Avg | 23.7% |
Valuation
| Median | |
|---|---|
| Name | |
| Mkt Cap | 2,581.7 |
| P/S | 7.9 |
| P/EBIT | 21.6 |
| P/E | 28.1 |
| P/CFO | 19.1 |
| Total Yield | 4.3% |
| Dividend Yield | 0.5% |
| FCF Yield 3Y Avg | 2.6% |
| D/E | 0.0 |
| Net D/E | 0.0 |
Returns
| Median | |
|---|---|
| Name | |
| 1M Rtn | -1.6% |
| 3M Rtn | -13.6% |
| 6M Rtn | -14.6% |
| 12M Rtn | 6.6% |
| 3Y Rtn | 78.2% |
| 1M Excs Rtn | 0.8% |
| 3M Excs Rtn | -12.2% |
| 6M Excs Rtn | -18.1% |
| 12M Excs Rtn | -16.8% |
| 3Y Excs Rtn | 4.1% |
Comparison Analyses
Segment Financials
Revenue by Segment| $ Mil | 2025 | 2024 | 2023 | 2022 | 2021 |
|---|---|---|---|---|---|
| Productivity and Business Processes | 106,820 | 69,274 | 63,364 | 53,915 | 46,398 |
| Intelligent Cloud | 87,464 | 87,907 | 74,965 | 60,080 | 48,366 |
| More Personal Computing | 50,838 | 54,734 | 59,941 | 54,093 | 48,251 |
| Total | 245,122 | 211,915 | 198,270 | 168,088 | 143,015 |
| $ Mil | 2025 | 2024 | 2023 | 2022 | 2021 |
|---|---|---|---|---|---|
| Productivity and Business Processes | 59,661 | 34,189 | 29,690 | 24,351 | 18,724 |
| Intelligent Cloud | 37,813 | 37,884 | 33,203 | 26,126 | 18,324 |
| More Personal Computing | 11,959 | 16,450 | 20,490 | 19,439 | 15,911 |
| Total | 109,433 | 88,523 | 83,383 | 69,916 | 52,959 |
Price Behavior
Price Behavior
| Market Price | $395.55 | |
| Market Cap ($ Bil) | 2,939.3 | |
| First Trading Date | 03/13/1986 | |
| Distance from 52W High | -26.7% | |
| 50 Days | 200 Days | |
| DMA Price | $428.69 | $481.42 |
| DMA Trend | indeterminate | down |
| Distance from DMA | -7.7% | -17.8% |
| 3M | 1YR | |
| Volatility | 31.4% | 26.3% |
| Downside Capture | 181.93 | 104.25 |
| Upside Capture | 94.75 | 88.98 |
| Correlation (SPY) | 34.4% | 62.5% |
MSFT Betas & Captures as of 2/28/2026
[1] Upside and downside betas calculated using positive and negative benchmark daily returns respectively
| 1M | 2M | 3M | 6M | 1Y | 3Y | |
|---|---|---|---|---|---|---|
| Beta | 1.72 | 1.27 | 1.05 | 0.97 | 0.89 | 1.00 |
| Up Beta | 1.40 | 0.48 | 0.39 | 0.50 | 0.94 | 1.01 |
| Down Beta | 0.05 | 0.56 | 0.70 | 0.88 | 0.69 | 0.90 |
| Up Capture | 112% | 93% | 64% | 62% | 84% | 104% |
| Bmk +ve Days | 9 | 20 | 31 | 70 | 142 | 431 |
| Stock +ve Days | 7 | 17 | 28 | 63 | 133 | 405 |
| Down Capture | 335% | 253% | 198% | 147% | 104% | 102% |
| Bmk -ve Days | 12 | 21 | 30 | 54 | 109 | 320 |
| Stock -ve Days | 14 | 24 | 33 | 61 | 118 | 347 |
[1] Upside and downside betas calculated using positive and negative benchmark daily returns respectively
Based On 1-Year Data
| Annualized Return | Annualized Volatility | Sharpe Ratio | Correlation with MSFT | |
|---|---|---|---|---|
| MSFT | 4.0% | 26.2% | 0.12 | - |
| Sector ETF (XLK) | 30.0% | 26.8% | 0.95 | 66.8% |
| Equity (SPY) | 19.6% | 18.9% | 0.81 | 62.6% |
| Gold (GLD) | 71.9% | 26.3% | 2.05 | -2.5% |
| Commodities (DBC) | 19.3% | 17.3% | 0.89 | 17.0% |
| Real Estate (VNQ) | 6.2% | 16.3% | 0.19 | 24.3% |
| Bitcoin (BTCUSD) | -15.3% | 44.2% | -0.25 | 40.3% |
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Based On 5-Year Data
| Annualized Return | Annualized Volatility | Sharpe Ratio | Correlation with MSFT | |
|---|---|---|---|---|
| MSFT | 12.6% | 26.2% | 0.45 | - |
| Sector ETF (XLK) | 17.7% | 24.7% | 0.64 | 80.6% |
| Equity (SPY) | 13.1% | 17.0% | 0.61 | 74.1% |
| Gold (GLD) | 24.1% | 17.3% | 1.14 | 6.2% |
| Commodities (DBC) | 11.2% | 19.0% | 0.47 | 11.3% |
| Real Estate (VNQ) | 4.8% | 18.8% | 0.16 | 39.8% |
| Bitcoin (BTCUSD) | 6.3% | 56.7% | 0.33 | 33.0% |
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Based On 10-Year Data
| Annualized Return | Annualized Volatility | Sharpe Ratio | Correlation with MSFT | |
|---|---|---|---|---|
| MSFT | 24.1% | 26.8% | 0.84 | - |
| Sector ETF (XLK) | 21.8% | 24.2% | 0.82 | 85.6% |
| Equity (SPY) | 14.5% | 17.9% | 0.70 | 78.5% |
| Gold (GLD) | 14.4% | 15.6% | 0.77 | 4.0% |
| Commodities (DBC) | 8.6% | 17.6% | 0.40 | 20.7% |
| Real Estate (VNQ) | 5.6% | 20.7% | 0.23 | 47.5% |
| Bitcoin (BTCUSD) | 67.4% | 66.8% | 1.07 | 20.8% |
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Returns Analyses
Earnings Returns History
Expand for More| Forward Returns | |||
|---|---|---|---|
| Earnings Date | 1D Returns | 5D Returns | 21D Returns |
| 1/28/2026 | -10.0% | -14.0% | -18.3% |
| 10/29/2025 | -2.9% | -6.4% | -10.0% |
| 7/30/2025 | 3.9% | 2.3% | -0.5% |
| 4/30/2025 | 7.6% | 9.6% | 16.7% |
| 1/29/2025 | -6.2% | -6.6% | -10.1% |
| 10/30/2024 | -6.1% | -2.9% | -1.9% |
| 7/30/2024 | -1.1% | -5.5% | -2.7% |
| 4/25/2024 | 1.8% | -0.3% | 8.0% |
| ... | |||
| SUMMARY STATS | |||
| # Positive | 11 | 12 | 13 |
| # Negative | 13 | 12 | 11 |
| Median Positive | 3.9% | 3.7% | 5.6% |
| Median Negative | -3.8% | -4.8% | -2.7% |
| Max Positive | 7.6% | 10.9% | 16.7% |
| Max Negative | -10.0% | -14.0% | -18.3% |
SEC Filings
Expand for More| Report Date | Filing Date | Filing |
|---|---|---|
| 12/31/2025 | 01/28/2026 | 10-Q |
| 09/30/2025 | 10/29/2025 | 10-Q |
| 06/30/2025 | 07/30/2025 | 10-K |
| 03/31/2025 | 04/30/2025 | 10-Q |
| 12/31/2024 | 01/29/2025 | 10-Q |
| 09/30/2024 | 10/30/2024 | 10-Q |
| 06/30/2024 | 07/30/2024 | 10-K |
| 03/31/2024 | 04/25/2024 | 10-Q |
| 12/31/2023 | 01/30/2024 | 10-Q |
| 09/30/2023 | 10/24/2023 | 10-Q |
| 06/30/2023 | 07/27/2023 | 10-K |
| 03/31/2023 | 04/25/2023 | 10-Q |
| 12/31/2022 | 01/24/2023 | 10-Q |
| 09/30/2022 | 10/25/2022 | 10-Q |
| 06/30/2022 | 07/28/2022 | 10-K |
| 03/31/2022 | 04/26/2022 | 10-Q |
Insider Activity
Expand for More| # | Owner | Title | Holding | Action | Filing Date | Price | Shares | Transacted Value | Value of Held Shares | Form |
|---|---|---|---|---|---|---|---|---|---|---|
| 1 | Smith, Bradford L | Vice Chair and President | Direct | Buy | 12122025 | 377.46 | 3,842 | 1,450,221 | 171,912,193 | Form |
| 2 | Smith, Bradford L | Vice Chair and President | Direct | Sell | 12122025 | 390.57 | 30 | 11,717 | 177,870,321 | Form |
| 3 | Smith, Bradford L | Vice Chair and President | Direct | Sell | 12122025 | 438.82 | 3,812 | 1,672,781 | 198,169,556 | Form |
| 4 | Numoto, Takeshi | EVP, Chief Marketing Officer | Direct | Sell | 12052025 | 478.72 | 2,850 | 1,364,352 | 26,703,825 | Form |
| 5 | Althoff, Judson | CEO Microsoft Commercial | Direct | Sell | 12032025 | 491.52 | 12,750 | 6,266,829 | 63,576,946 | Form |
MSFT Trade Sentinel
Stock Conviction
OVERWEIGHT (Score 9-10)
CONVICTION RATIONALE
The probability-adjusted skew is exceptionally attractive at over 7.0x. This is driven by the 'WIDENING' competitive moat and an accelerating leading indicator (RPO), which assigns a high (70%) probability to the upside case. The downside is cushioned by strong underlying demand, making the risk/reward profile highly favorable.
STOCK ARCHETYPE
High-Beta CompounderDespite its mega-cap status, Microsoft's investment thesis is overwhelmingly driven by the hyper-growth Intelligent Cloud / AI segment. The stock's valuation and volatility are highly sensitive to the durability of this growth and the strength of its competitive moat, aligning it with the 'High-Beta Compounder' archetype.
INVESTMENT THESIS
The investment thesis is centered on Microsoft's unique ability to monetize generative AI by leveraging its two primary strategic assets: its exclusive cloud partnership with OpenAI and its massive, embedded enterprise distribution channel via Microsoft 365. This allows Microsoft to both capture new AI workloads in Azure and drive significant Average Revenue Per User (ARPU) uplift from its existing 450 million+ commercial seats.
Mechanism:
Microsoft captures value through a two-pronged approach: 1) Increased consumption of high-margin Azure services as enterprises build and run AI models on its cloud. 2) Direct, high-margin revenue from upselling a premium-priced Copilot subscription to its vast, captive Microsoft 365 user base.
Supporting Evidence:
- Azure revenue growth accelerated to +39% YoY in Q2 FY26, driven by a 157% increase in AI services.
- Commercial Remaining Performance Obligation (RPO) surged 110% YoY to $625B, indicating a massive pipeline of future revenue.
- The addressable market for the Copilot upsell is over 450 million commercial paid seats, representing a substantial, high-margin revenue opportunity.
PRIMARY RISK
The primary friction on the stock is the market's concern over the massive capital expenditures required to build out AI infrastructure ahead of fully realized revenue. A record $37.5B in Q2 FY26 CapEx, coupled with a slight deceleration in Azure growth, has created anxiety about diminishing returns on investment and potential near-term margin and free cash flow pressure.
Mechanism:
If the revenue ramp from AI services (particularly Copilot adoption) is slower than the pace of capital spending, it will lead to FCF compression and multiple compression. The thesis breaks if the market perceives that Microsoft is overspending for growth that is either decelerating or less profitable than anticipated, damaging the capital efficiency narrative.
Supporting Evidence:
- Capital expenditures increased 66% YoY to $37.5 billion in Q2 FY26.
- The stock price reacted negatively to the last earnings report despite beating estimates, highlighting market sensitivity to the CapEx/growth dynamic.
- Cloud gross margin percentage decreased to 67% due to the cost of AI infrastructure investments.
Key KPI Watchlist
| KPI | Threshold | Rationale |
|---|---|---|
| Azure and Other Cloud Services Revenue Growth | Sustain >35% YoY | This is the primary growth engine. Any significant deceleration below this level would challenge the premium valuation and suggest the AI investment cycle is not yielding expected returns. |
| Quarterly Capital Expenditures | Guidance below $40B | The market is highly sensitive to the magnitude of AI spending. A signal that peak CapEx is near without a corresponding drop in growth would be a strong positive catalyst, assuaging fears of a prolonged cash burn. |
| Commercial RPO Growth (ex-OpenAI) | Sustain >25% YoY | This is the cleanest leading indicator of underlying, organic enterprise demand for Microsoft's cloud platform. Sustained strength here provides high visibility into future revenue growth and validates the long-term thesis. |
Core Investment Debate
The AI Capex 'Arms Race': Visionary Investment or Margin Destroyer?
BULL VIEW
Demand is supply-constrained. The $625B RPO and 157% growth in AI services prove that every dollar spent on GPUs will be monetized, securing a decade of growth.
CORE TENSION
Bulls see massive AI capex as necessary to capture a generational opportunity, while bears fear diminishing returns, margin pressure, and that demand won't justify the $150B+ annual spend.
PREVAILING SENTIMENT
NEUTRAL
The market's negative reaction to Q2 FY26 earnings, where the stock plummeted despite a beat, highlights the intense focus on Azure's slight growth deceleration (39%) versus the 66% YoY surge in capital expenditures.
BEAR VIEW
Massive capex ($37.5B in Q2), slight Azure deceleration (40% to 39%), and high RPO concentration in OpenAI signals unsustainable, inefficient growth with significant execution risk.
Next 6 months: Risks and Catalysts
| Timeline | Event & Metric To Watch |
|---|---|
Late April 2026 | FY26 Q3 Earnings Call Watch: Azure constant currency growth vs. forward CapEx guidance. The key is the ratio between the two. |
Next 3-6 Months | Regulatory Ruling (FTC/EU) Watch: Formal lawsuit or 'Statement of Objections' filed regarding the OpenAI partnership or Azure cloud practices. |
H1 2026 | AI Infrastructure Supply Chain Update Watch: Any explicit mention of 'GPU supply constraints' or 'capacity limitations' in earnings or supplier commentary (e.g., Nvidia). |
Ongoing through 2026 | Enterprise IT Spending Reports (e.g., Gartner) Watch: Downward revisions in 2026/2027 software budget growth or specific mentions of 'AI-driven headcount reduction'. |
Key Events in Last 6 Months
| Date | Event | Stock Impact |
|---|---|---|
Aug 11, 2025 | C-Suite Stock Sale Details: CEO Satya Nadella filed to sell a portion of his holdings as part of a pre-arranged 10b5-1 trading plan, a recurring event noted in the company's risk factors. | Changed Little (-0.1%) $520.20 -> $519.94 |
Sep 12, 2025 | Annual Shareholder Letter Details: CEO Satya Nadella's annual letter to shareholders was released, reinforcing the company's long-term commitment to leading the AI platform shift and investing aggressively to capture the opportunity. | Modest 1.8% gain $500.07 -> $508.94 |
Oct 31, 2025 | Strategic Event: M365 Copilot Feature Expansion Details: Microsoft detailed new 'Agent Mode' capabilities and other enhancements for its Copilot AI assistant across the M365 suite, key to its AI monetization strategy. The market reaction was muted. | Slight -1.5% pullback $524.77 -> $516.84 |
Oct 29, 2025 | Q1 FY2026 Earnings & OpenAI Partnership Restructuring Details: Microsoft reported strong Q1 results with Azure growth at 40%. On the same day, news broke of a restructured partnership with OpenAI, giving OpenAI more flexibility. Stock fell the next day. | Fell notably by 2.9% $540.53 -> $524.77 |
Jan 28, 2026 | Q2 FY2026 Earnings Release Details: Despite beating revenue and EPS estimates, the stock dropped significantly. The market focused on a slight Azure growth deceleration to 39% and a 66% YoY increase in capital expenditures to $37.5 billion. | Plummeted 10.0% $481.63 -> $433.50 |
Feb 5, 2026 | Stifel Downgrade Details: Stifel downgraded MSFT to 'Hold' from 'Buy', citing concerns about optimistic 2027 expectations, rising AI-related capital expenditures, and potential cloud supply constraints. | Fell notably by 4.95% $414.19 -> $393.67 |
Risk Management
Position Sizing
1% - 3%
CONSERVATIVE
Stock is in a Moderate Volatility regime but with Spiking near-term fear. The Neutral sentiment, driven by the unresolved debate on AI Capex ROI and high valuation, reduces conviction despite high revenue visibility. We cap exposure to Conservative (1-3%) until the profitability of AI investments becomes clearer.
Diversification Alternatives
ANET
SECTORArista Networks is a 'picks and shovels' play on AI, benefiting from massive data center buildouts (including MSFT's) without the risk of monetizing the AI models themselves.
Core Thesis: The core thesis is built on providing the high-speed networking switches essential for AI workloads. As data demands explode, ANET's leadership in this niche provides a cleaner growth thesis.
DDOG
INDUSTRYDatadog benefits from the growth and complexity of cloud platforms like Azure as a key monitoring provider, but its capital-light model avoids the capex arms race risk facing Microsoft.
Core Thesis: The core thesis is that as cloud and AI deployments become more complex and mission-critical, the demand for third-party observability and security platforms will grow in tandem.
How Is The Market Pricing MSFT?
Microsoft is transitioning from a diversified software and hardware seller to an AI-first, capital-intensive infrastructure platform, where growth in its Azure cloud is the primary valuation driver and is increasingly gated by data center capacity.
Filter all news through the lens of AI monetization and the capital intensity required to achieve it.
What will confirm the thesis
Azure revenue growth accelerating or holding above 35% YoY; evidence of material revenue contribution from Microsoft 365 Copilot driving ARPU growth >10%; major enterprise-wide AI platform wins with named Fortune 500 customers.
What will damage the thesis
Azure revenue growth decelerating below 35% for consecutive quarters; reports of significant customer churn from Azure to AWS or Google Cloud; major security breaches impacting customer trust in Microsoft's cloud; significant anti-trust regulatory action in the US or EU targeting Azure or Office 365 bundling.
Noise: Real but irrelevant to thesis
Quarterly fluctuations in Windows OEM or Surface device sales; slight misses or beats on LinkedIn or Dynamics 365 revenue; individual benchmark wins or losses against competing AI models.
Repricing Catalyst
The market is repricing Microsoft based on the massive capital expenditures ($37.5B in Q2 FY26) required to build out its AI infrastructure. The key catalyst is proving this investment can generate a high ROI by sustaining Azure's hyper-growth (~38-39% YoY) and successfully monetizing AI capabilities, like Copilot, at scale across its 450 million+ commercial Office user base.
What MSFT Makes & Who Pays
TTM figures based on Q2 FY2026 Earnings Release, Jan 28, 2026
Cloud & AI Platform (Azure)
$131.6B TTM (40.5% of Total) · 42.2% MarginWhat It Is
Azure cloud services including IaaS, PaaS, Azure AI, Azure SQL, and other server products.
Who Pays & How
Enterprises of all sizes pay via consumption (pay-as-you-go) or multi-year contracts to host applications, manage data, and access AI models. The deep integration with other Microsoft products creates high switching costs and a unified platform advantage.
Primarily consumption-based (e.g., per hour of compute, gigabyte of storage) and long-term enterprise agreements.
Competition
Amazon Web Services (AWS)
AWS has a larger market share (~28-30% vs. Azure's ~20-21%) and is perceived as the early market leader.
Microsoft's established enterprise sales channels and the integration of Azure with its ubiquitous Office 365 and Dynamics software create a powerful hybrid cloud value proposition that is difficult for AWS to replicate.
Productivity & Business Software
$136.4B TTM (42% of Total) · 60% MarginWhat It Is
Microsoft 365 (Office, Teams, Exchange), Dynamics 365 ERP/CRM, and LinkedIn professional network services.
Who Pays & How
Enterprises pay a recurring per-user, per-month fee for access to essential productivity tools. High switching costs are created by deep integration into workflows, file format standards, and collaboration habits. Individuals also subscribe to Microsoft 365 Consumer.
Per-user per-month/year subscription (SaaS).
Competition
Google LLC - Google Workspace
Google Workspace offers a competitive, cloud-native productivity suite, often at a lower price point, which is attractive to startups and educational institutions.
Microsoft Office's decades-long incumbency has created a powerful network effect and deep integration with enterprise IT and business processes, making it the default standard and difficult to displace.
Windows, Gaming & Devices
$57.2B TTM (17.6% of Total) · 34.6% MarginWhat It Is
Windows OEM licenses, Surface PCs, Xbox consoles, Xbox content and services, Search and news advertising.
Who Pays & How
PC manufacturers (OEMs) pay per-unit license fees for Windows OS. Consumers pay for Surface hardware, Xbox consoles, and Game Pass subscriptions. Advertisers pay for placement in Bing search results.
Per-unit license (Windows), one-time hardware purchase (Surface, Xbox), recurring subscription (Xbox Game Pass), and pay-per-click (Search).
Competition
Apple Inc. (macOS, iPad), Sony (PlayStation), Google (ChromeOS)
Apple offers a highly integrated hardware/software ecosystem. Sony's PlayStation has a very strong exclusive games library. Google's ChromeOS is dominant in the low-cost education market.
Windows' massive 90%+ share of the desktop OS market creates a durable moat. Xbox has a strong brand and a growing subscription service in Game Pass.
MSFT Evolution: Price Return by Era
1975–2000 · The Windows Monopoly
Dominating the PC Era
Founded by Bill Gates and Paul Allen in 1975, Microsoft's breakthrough came from providing the MS-DOS operating system for the IBM PC in 1980. The launch of Windows 3.0 in 1990 and Windows 95 cemented its monopoly in PC operating systems, while the Microsoft Office suite became the global standard for productivity software.
2000–2014 · The Lost Decade
Missing Mobile, Stagnating Stock ~0% (2000-2013)
While Windows XP was a massive success, this era was defined by missed opportunities, particularly the strategic failure to compete in the smartphone revolution dominated by Apple's iOS and Google's Android. The stock price remained largely stagnant for over a decade as the company struggled to find a new growth engine beyond the maturing PC market. Key initiatives included the launch of the Xbox in 2001 and Windows Vista in 2007.
2014–Present · The Cloud & AI Transformation
Nadella Pivots to Cloud-First, AI-Powered Growth +1000% (Feb 2014 - Feb 2026)
Satya Nadella's appointment as CEO in 2014 marked a profound strategic pivot to a 'cloud-first, mobile-first' strategy. This era saw the explosive growth of the Azure cloud platform, transforming the company into a primary competitor to Amazon Web Services. The focus shifted from protecting the Windows monopoly to driving subscription revenue through Microsoft 365 and becoming the essential platform for enterprise digital transformation, culminating in a massive strategic bet on generative AI.
Market Appears To Be Acting Against Core Thesis
Price structure is in a downtrend. Multiple SMA levels broken and declining. Thesis requires reclaiming 200D before any bull case is credible. Relative to SPY: Lagging the market on the 63D window, but 'relative strength' is beginning to stabilize; watch for inflection. Volume and momentum are deeply bearish. The sustained distribution is evident across multiple volume metrics. Earnings history is a strong counter-signal. The market has consistently rejected the narrative. This is not noise, but institutional disagreement.
① Structure
-4
Structural pillar score (-4 to +4). Driven by trend regime, SMA cross events, proximity to 52W high, and relative strength vs SPY.
② Volume / Momentum
-4
Volume/Momentum pillar score (-4 to +4). Driven by institutional footprint score, OBV divergence, and momentum character.
③ Catalyst
-4
Catalyst pillar score (-4 to +4). Driven by earnings day reaction, 20D post-earnings drift, and post-earnings volume character.
Combined Score
-12 / 12
1
Price Structure & Trend
Downtrend · Death Cross
▾
2
Momentum
Deteriorating
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3
Relative Strength vs. SPY
Neutral Relative Strength
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4
Institutional Footprint & Volume
Mild Distribution
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5
Volatility
Normal
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6
Key Price Levels
Range · Vol Falling
▾
7
Earnings Reaction History
Consistent Pressure
▾
8
How the Verdict Is Derived
Three Pillars
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External Quote Links
| Y Finance | Barrons |
| TradingView | Morningstar |
| SeekingAlpha | ValueLine |
| Motley Fool | Robinhood |
| CNBC | Etrade |
| MarketWatch | Unusual Whales |
| YCharts | Perplexity Finance |
| FinViz |
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