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Microsoft Corporation MSFT

Technology  —  Software Infrastructure
516.17 18.24 3.66% as of 25 Sep
Market cap
$3.68T
P/E
28.7×
S&P 500 Member Dividend Champion (10y) Cash Flow Champion (3y) Revenue Champion (10y) Insider Buys (last 12m)
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Overview Business Profile Financial Analysis Income Statement Balance Sheet Cash Flow Metrics & Ratios 10-Q 10-K

Microsoft Corporation (MSFT) Financial Analysis

Updated · Covers results through Q4 FY2026 · How this is made

Snapshot

Microsoft generated $331.8 billion of revenue, $225.5 billion of gross profit, $155.2 billion of operating income and $133.7 billion of net income in FY2026. Diluted EPS was $17.95 in FY2026, while weighted average shares were 7.4 billion shares in FY2026.

In Q4 FY2026, Microsoft reported $90.0 billion of revenue, $60.5 billion of gross profit, $40.6 billion of operating income and $35.8 billion of net income. Diluted EPS was $4.81 in Q4 FY2026. Market capitalisation was $3.70 trillion as of September 24, 2026.

Growth

Revenue grew 17.8% in FY2026 against FY2025 and had a 16.1% compound annual growth rate in FY2023–FY2026. Diluted EPS grew 31.6% in FY2026 against FY2025 and had a 22.9% compound annual growth rate in FY2023–FY2026. Free cash flow declined −6.46% in FY2026 against FY2025, while its compound annual growth rate was 4.04% in FY2023–FY2026.

Revenue was $90.0 billion in Q4 FY2026, up 8.59% in Q4 FY2026 against Q3 FY2026 and 17.7% in Q4 FY2026 against Q4 FY2025. Diluted EPS was $4.81 in Q4 FY2026, up 12.6% in Q4 FY2026 against Q3 FY2026 and 31.8% in Q4 FY2026 against Q4 FY2025. Free cash flow was $19.6 billion in Q4 FY2026.

Profitability

Gross margin was 67.9% in FY2026, down −1.0 percentage point over FY2021–FY2026. Operating margin was 46.8% in FY2026, up 5.2 percentage points over FY2021–FY2026. Pre-tax margin was 50.0% in FY2026, up 7.7 percentage points over FY2021–FY2026, and net margin was 40.3% in FY2026, up 3.9 percentage points over FY2021–FY2026.

Return on equity was 34.0%, return on assets was 19.4%, and return on invested capital was 23.9% in FY2026. Return on equity was lower than 47.2% in FY2022, while return on invested capital was lower than 46.7% in FY2022. Industry-median comparisons for margins and returns are not reported.

Balance sheet

Microsoft held $76.8 billion of cash and short-term investments and $40.3 billion of total debt in FY2026. Net debt was −$36.5 billion in FY2026, compared with −$51.4 billion in FY2025. Shareholders’ equity was $442.4 billion in FY2026, up from $343.5 billion in FY2025, while book value per share was $59.55 in FY2026.

Working capital was $38.9 billion in FY2026, compared with $49.9 billion in FY2025. The current ratio was 1.2× in Q4 FY2026, and debt to equity was 0.1× in Q4 FY2026. Net debt was −$36.5 billion in Q4 FY2026.

Cash flow & capital return

Operating cash flow was $182.9 billion in FY2026, growing 34.4% in FY2026 against FY2025. Capital expenditure was $115.9 billion in FY2026, compared with $64.6 billion in FY2025. Free cash flow was $67.0 billion in FY2026, down −6.46% in FY2026 against FY2025, and represented 50.1% of net income in FY2026.

Microsoft paid $26.4 billion of dividends and made $20.3 billion of net share repurchases in FY2026. Capital returned to shareholders was $46.7 billion in FY2026. Weighted average shares were 7.4 billion shares in FY2026, and share count changed −1.56% over FY2021–FY2026. Free cash flow was $19.6 billion in Q4 FY2026.

Valuation

The P/E was 27.6× as of September 24, 2026, below the 35.1× five-year median as of September 24, 2026, over the five fiscal years to FY2026 and the 34.1× ten-year median as of September 24, 2026, over the ten fiscal years to FY2026. The P/S was 11.1× as of September 24, 2026, below the 12.0× five-year median and above the 10.3× ten-year median for their respective periods.

The P/B was 8.4× as of September 24, 2026, below both the 11.6× five-year median and 11.2× ten-year median for their respective periods. EV/Sales was 11.0× as of September 24, 2026, below the 11.7× five-year median and above the 9.9× ten-year median for their respective periods. EV/Cash flow was 54.7× as of September 24, 2026, above the 41.6× five-year median and 33.9× ten-year median for their respective periods. Industry-median valuation comparisons are not reported.

What changed since last quarter

Revenue increased 8.59% in Q4 FY2026 against Q3 FY2026 to $90.0 billion in Q4 FY2026, while diluted EPS increased 12.6% in Q4 FY2026 against Q3 FY2026 to $4.81 in Q4 FY2026. Free cash flow increased 24.3% in Q4 FY2026 against Q3 FY2026 to $19.6 billion in Q4 FY2026. Gross margin declined −0.4 percentage points and operating margin declined −1.2 percentage points in Q4 FY2026 against Q3 FY2026.

Against Q4 FY2025, revenue increased 17.7% and diluted EPS increased 31.8% in Q4 FY2026. Free cash flow declined −23.2% in Q4 FY2026 against Q4 FY2025, while gross margin declined −1.4 percentage points and operating margin increased 0.2 percentage points in Q4 FY2026 against Q4 FY2025. The changes are not attributed to management-stated reasons.

Open questions

  • What factors drove the change in free cash flow relative to operating cash flow?
  • What explains the movement in gross margin across the recent quarters?
  • What contributed to the change in net debt during the latest year?
  • What factors account for the change in return on invested capital over time?

This page is for information only. It is not investment advice, a recommendation or an offer to buy or sell any security. Figures may contain errors; verify against the company's filings.