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Microsoft (MSFT), one of the "Magnificent 7,” recently delivered a strong quarter that gave markets plenty to think about. On July 30, shares jumped 9% in extended trading after the company posted fourth-quarter results that beat expectations on both revenue and earnings. Fiscal Q4 revenue guidance had already been set high by CFO Amy Hood, with a range between $74.7 billion and $75.8 billion.
The actual results outpaced that range, marking Microsoft’s fastest growth rate in over three years. Investors did not take long to react. MSFT stock surged past $550 after hours and continued to climb the next day. On July 31, it hit a session high above $555, pushing its market capitalization to around $4.1 trillion. That made Microsoft the second company after Nvidia (NVDA) to cross the $4 trillion mark.
While the growth momentum is strong, Microsoft is not without its near-term challenges. The company continues to face data center infrastructure constraints as it scales up to meet the rising demand for artificial intelligence (AI). CFO Amy Hood had initially anticipated improved supply conditions by June, but that timeline has now shifted to December.
Still, the pace of investment remains aggressive. At current run rates, annualized spending could exceed $120 billion, a 36% increase year-over-year (YOY). This level of expansion reflects Microsoft’s long-term conviction in AI. With MSFT stock riding high on strong growth, let's see if there’s still time to buy shares.
About Microsoft Stock
Based in Redmond, Washington, Microsoft is one of the most dominant names in global tech. With a current market cap of $3.9 trillion, the company's reach is everywhere. Microsoft’s Windows operating system alone controls more than 70% of the PC software market. But that is only the beginning.
Microsoft's product ecosystem spans cloud computing (Azure), productivity software (Office 365), developer tools, business applications, gaming, and more. From enterprise clients to individual users, the company has built a presence across nearly every category.
Over the past 52 weeks, MSFT stock has delivered a 30% gain, comfortably beating the Nasdaq 100 Index’s ($IUXX) 28% climb in the same period.
Valuation remains high. MSFT trades at 34.2 times adjusted forward earnings and 13.8 times sales, placing it well above industry averages. Such a premium suggests investors are pricing in continued growth and AI-driven upside.
Microsoft also remains a consistent dividend payer. It has increased dividends for 20 years in a row. Right now, it pays an annual dividend of $3.28, yielding 0.62%. The next quarterly payout of $0.83 is scheduled for Sept. 11 to shareholders of record as of Aug. 21.
Microsoft Surpasses Q4 Earnings
Microsoft’s Q4 results posted strong revenue, strong profit, and strong momentum. Total revenue came in at $76.4 billion, up 18% YOY. The figure beat the $73.81 billion Street estimate, showing that Microsoft’s core businesses are still expanding at a pace.
Its Intelligent Cloud segment, which includes Azure, posted $29.9 billion in revenue, a 26% increase from the year-ago quarter. Productivity and Business Processes, home to Office and LinkedIn, brought in $33.1 billion, up 16% YOY. The More Personal Computing division — which includes Windows, Surface devices, Xbox, and search advertising — delivered $13.5 billion, a 9% YOY jump.
Profit margins held strong, too. Gross margin hit $52.4 billion, rising 16.4%. Net income grew 23.6% to $27.2 billion. EPS grew 23.7% from the year-ago value to $3.65, beating the expected $3.37 per share. Cash and cash equivalents climbed to $30.2 billion, a 65% increase from last year.
Microsoft’s AI integration is showing up in the numbers. Copilot, the company’s AI assistant for Microsoft 365 and Windows, now has 100 million monthly active users. That adoption is also lifting revenue per user across Microsoft 365 commercial cloud bundles.
Looking ahead, analysts expect Microsoft’s Q1 2026 EPS to rise 10.3% YOY to $3.64. Full-year EPS is forecast at $15.32, up 12.3%. Meanwhile, for fiscal 2027, the bottom line is projected to grow another 16.8% to $17.89.
What Do Analysts Expect for Microsoft Stock?
Analysts remain largely bullish on MSFT stock following the strong Q4 results. Daniel Ives from Wedbush raised his price target from $600 to $625 and kept an “Outperform” rating. Ives highlighted Microsoft’s ongoing strength in cloud and AI as the key drivers behind the revised outlook.
Truist analyst Joel Fishbein also upped his target, moving from $600 to $650. He maintained a “Buy” rating and pointed to accelerating Azure growth, AI adoption across services, and the broader shift to cloud-based infrastructure as reasons for the higher valuation.
Analyst sentiment for MSFT remains optimistic with an overall rating of “Strong Buy.” Out of 46 covering analysts, 39 maintain a “Strong Buy,” five issue a “Moderate Buy,” and two recommend to “Hold” on the stock.
MSFT stock’s average price target of $617.42 represents potential upside of 18% from current levels. On the more bullish end, the Street-high target of $675 implies that the stock could climb 29% from current levels. Analysts still see more upside ahead, showing it’s not too late to buy the stock.
