MSFT · Q4 FY2026
MICROSOFT CORP Q4 FY2026 earnings analysis
By SageNoodle ResearchNeutral
| Metric | Actual | Estimate | Result |
|---|---|---|---|
| Revenue | $90.01B | $76.44B (yr ago) | Beat |
| EPS | $4.81 GAAP | $3.65 GAAP (yr ago) | Beat |
| Free Cash Flow | $19.64B | $25.57B (yr ago) | Miss |
| Gross Margin | 67.2% | 68.6% (yr ago) | Miss |
| Operating Margin | 45.1% | 44.9% (yr ago) | Beat |
What changed
Revenue increased 18.0% to $90.01 billion as Azure and other cloud services grew 43.0%, while GAAP EPS increased 31.8% to $4.81. The trade-off was cash conversion: quarterly capital expenditure more than doubled to $35.80 billion, reducing free cash flow to $19.64 billion from $25.57 billion and contributing to a 140-basis-point gross-margin decline.
Impact on the investment thesis
There is no prior SageNoodle fair value to revise; this update establishes a $494 base-case value. Strong cloud demand supports the earnings base, but weaker free cash flow and lower gross margin prevent the quarter from justifying a premium to the current $492.44 price.