Microsoft Outshines Tesla in Earnings as Both Companies Enter September

Microsoft and Tesla both enter September with momentum, but their earnings paint different pictures. Microsoft closed its record fiscal year on a high note, driven by Azure's strong growth and Copilot's adoption. The company reported $90 billion in Q4 revenue, an 18% increase, with Azure surpassing the $100 billion annual mark.

Azure's success is not limited to its revenue; it has also enabled Microsoft to achieve a 45% operating margin, a stark contrast to Tesla's collapsing margins. Tesla, on the other hand, posted record Q2 deliveries of 480,126 vehicles but saw its operating income plummet to 1.4%. The company's free cash flow turned negative at $1.09 billion.

The disparity in earnings is reflected in their valuations. Microsoft trades at 28 times earnings with a $569.45 analyst target, while Tesla sits at 332 times earnings with a $390.09 target. The valuation gap highlights the contrast between Microsoft's proven business model and Tesla's unproven Robotaxi promises.

Microsoft's strong financials are backed by its commercial RPO of $678 billion, a backlog that pre-sells future quarters. This stability is in stark contrast to Tesla's capex wave, which is aimed at building the future but has yet to yield returns.