Microsoft Stock Soars on Strong Earnings, But Pullback Looms
Microsoft's stock price has skyrocketed over 25% since its earnings report on July 29, turning positive for the year on August 5. This comes after a nearly 30% drop between October 2025 and March 2026.
The company's Q4 2026 earnings report checked all the boxes that were concerning investors, including concerns over sustained hyperscaler spending, AI-sparked SaaS-pocalypse, and monetizing AI. Microsoft posted fiscal fourth-quarter revenue of $90 billion, up 18% year over year, with Azure revenue climbing 43%. Full fiscal 2026 revenue topped $331 billion.
The numbers behind the rally help explain why some investors are questioning if the stock is due for a pullback. The company's strong earnings report and subsequent deals with Chevron and Constellation Energy suggest the demand side of the AI story is real and multi-year in nature.
However, Microsoft's free cash flow (FCF) trend suggests the cost side is also real and it isn't going away next quarter. Management now expects roughly $175 billion in fiscal 2027 capital expenditures, changing how it accounts for some of that spending.