What Are Microsoft Investors Betting On?

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Microsoft (MSFT) stock trades at 26.8 times its adjusted earnings over the last twelve months. This profit figure leaves out one-time items and adds back stock-based pay after tax. That is a lot to pay for a single year of profit, and the multiple is about the same, 26.7 times, against the profit analysts expect for fiscal 2027. That forecast may not add back stock-based pay, so it may count profit on a different basis. The stock only looks cheaper against fiscal 2028 profit. So what kind of growth are you paying for at today’s price?

Microsoft Investors Are Betting On Sales Growth

The consensus forecast projects Microsoft’s revenue rising about 19% in fiscal 2027, to $395 billion. For fiscal 2028, the forecast anticipates sales growth of 20.5% and net income growth of 20.9%. The forecast’s net margin is 37.7% in fiscal 2027 and 37.8% in fiscal 2028. This means the profit growth you are betting on comes from more sales, not from wider margins.

Based on the consensus forecast, Microsoft stock trades at 26.7 times fiscal 2027 earnings and 22.1 times fiscal 2028 earnings. Its trailing multiple on adjusted earnings is 26.8 times.

Has Microsoft Delivered Sales Growth Near The Forecast?

For fiscal 2027, Microsoft is close. Revenue grew 18.8% in fiscal Q1 2027, and management guided for growth of 18% to 19% in fiscal Q2. Over the last twelve months, though, revenue grew 17.9%. This means the fiscal 2028 forecast expects faster sales growth than Microsoft has delivered.

That growth is uneven across the business. In fiscal 2026, Microsoft’s Intelligent Cloud segment grew 29.7%, while its More Personal Computing segment shrank 1.1%.

Microsoft reported a net margin of 40.3% in fiscal 2026. The consensus forecast has a lower margin in both coming years. The forecast does not specify whether its profit is reported or adjusted, meaning the two margins may not be measured the same way.

Where Could Microsoft Fall Short Of The Forecast?

The likeliest place is data center capacity. On its October 28 call, management said customer demand continues to exceed available supply, and some third-party GPU capacity Microsoft was counting on for fiscal Q2 has moved into the second half of the fiscal year. Management guided for Azure growth of 49% to 50% in fiscal Q2 and said Microsoft needs further efficiency gains across its fleet to reach it. Any further delay would leave Microsoft less to sell and pull the sales forecast down.

Microsoft has worked around these delays once already: Azure revenue grew 48% in fiscal Q1 2027, ahead of management’s expectations, even with third-party capacity arriving late.

Price is the other place the forecast could slip. Management said the price Microsoft gets per token, a unit of AI work, can change through the quarter. Foundry, its platform for building AI agents, more than tripled its revenue from a year earlier in fiscal Q1 2027. Management named higher revenue per token as one reason Foundry beat expectations. A fall in that price would pull the sales forecast down too.

If Microsoft delivers the consensus forecast, the multiples on fiscal 2027 and fiscal 2028 earnings are a fair picture of what you pay for the stock. If capacity arrives late or token prices slip, profit could fall short of the forecast. Those multiples would then understate what you pay, making the stock a riskier bet. Azure growth against management’s guide is the number to watch, and Microsoft is expected to report it in January 2027.

Sitting On A Big Gain In Microsoft?

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