Microsoft's Margin Peak Arrives with Azure Build-Out Costs

Microsoft (MSFT) is enjoying its most profitable stretch in years, with net margin reaching 40.3% over the trailing twelve months, the highest in at least five years.

The company's stock trades at $493.95, about 92% of its 52-week high, and revenue grew 17.8% year-over-year to $331.8 billion in fiscal Q4 2026.

However, this peak margin arrives with a growing bill: the Azure build-out costs are climbing, with $41 billion spent on capital expenditure in just one quarter, two-thirds of which was on short-lived assets like CPUs and GPUs.

The company's gross margin was 67% in fiscal Q4 2026, down year-over-year due to a sales mix shift towards Azure and AI infrastructure spending. Management guides fiscal 2027 operating margins down less than one point while still expecting double-digit revenue and operating income growth.