Microsoft's most important quarter yet?

Microsoft FY2026 Q4 Earnings Preview. Alphabet beat everything and still fell. Now the same question comes for Microsoft.

Last week gave investors something to think about. Alphabet reported another excellent quarter. Revenue grew 24%, Google Cloud accelerated to 82%, and the company beat expectations across the board. The stock still fell after management raised full-year capex to $195-205 billion and free cash flow turned negative for the quarter.

That reaction matters because Microsoft faces many of the same questions this week. Investors already know AI spending is going to remain high. What they want to understand now is what that spending means for margins over the next couple of years.

Unlike Alphabet, Microsoft has already spent most of this year trading under that concern. The stock is still around 20% below its highs and trades at roughly 20x forward earnings.

Expectations are much lower today than they were a year ago, even Michael Burry got interested in the trade:

The Big Short Goes Big Long on Microsoft (MSFT). Financial & Valuation Excel Model Inside.

Wednesday is probably less about the June quarter than about FY2027. Azure is still expected to grow around 40%, demand continues to exceed available capacity, and the commercial backlog has reached $627 billion.

None of that will matter much if management lowers its margin outlook. On the other hand, if the guidance is better than investors expect, the discussion around the stock could change fairly quickly.

Below you’ll find our full framework for the quarter, together with the model we use to think about the different outcomes.

Inside this post: our full MSFT Financial & Valuation Excel Model

The same five-year model we use to manage our own positions, attached at the bottom for members:

• Income Statement to 2030: the full P&L build, from revenue down to EPS, with the margin path you choose as capex turns into depreciation

• Cash Flow and Capital Return: what survives of free cash flow through a ~$190 billion capex year, and what still comes back through buybacks and the dividend

• Intrinsic Value sheet: today’s price versus what the earnings power is actually worth, so you know your buy price before Wednesday, not after the move

• Your live assumptions: change the revenue CAGR, the operating margin, the tax rate, the price or the share count, in one cell each, and watch the whole model, EPS and forward multiple included, update in seconds

Read the setup below, then open the file and navigate the upside yourself.

Before the release, here is what we think matters: the key numbers, the guidance to watch, what the options market expects, what institutional investors are doing and the prices where we would be comfortable adding.

And if you want to track every live Special Situation as it unfolds, our private investment dashboard and Special Situations Tracker gives you real-time visibility into every position, including entry prices, key dates, current status, and upcoming catalysts. Get access before our price upgrade to €99.99:

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