NEW YORK, July 19, 2026, 16:04 (EDT)
- U.S. markets did not open on Sunday; Microsoft rose 2.3% over the past week.
- The stock outperformed the Nasdaq by 5.1 percentage points.
- Alphabet NASDAQ:GOOGL will report results on Wednesday, with Microsoft set to report on July 29.
Microsoft gained from $385.10 to $393.82 over the past week. The Nasdaq slipped 2.8% and the S&P 500 dropped 1.5%. On Friday, Microsoft declined 1.8%.
The stronger performance has been significant. Certain active managers are opting for hyperscalers and software shares instead of chip stocks.
The main focus is on cash conversion. In the March quarter, 66% of Microsoft’s operating cash flow was used for property and equipment payments. This resulted in $15.8 billion in free cash flow.
UBS Group NYSE:UBS expects the sector’s spending cycle to slow. The bank forecasts hyperscaler capex growth at 76% for this year, 25% in 2027, and 6% in 2028.
This could result in an imbalance, allowing Microsoft to profit from continued cloud capacity sales even as construction slows.
At Friday’s close, Microsoft’s P/E was below that of three leading AI competitors.
| Company | Friday close | Friday move | P/E |
|---|---|---|---|
| Microsoft NASDAQ:MSFT | $393.82 | down 1.8% | 23.4x |
| Alphabet NASDAQ:GOOGL | $346.77 | fell 2.2% | 26.5x |
| Amazon.com NASDAQ:AMZN | $247.23 | dropped 1.0% | 29.6x |
| Nvidia NASDAQ:NVDA | $202.81 | slipped 2.3% | 30.9x |
Friday’s closing figures and latest reported P/E ratios.
The reduced multiple brings tangible expenses. Microsoft expects approximately $190 billion in capital expenditures for 2026, which incorporates $25 billion due to increased component costs.
Azure revenue grew by 40% last quarter. Microsoft Cloud revenue was up 29%, reaching $54.5 billion.
Microsoft has surpassed 20 million paid seats for its 365 Copilot product. The company’s AI segment now has an annual run rate of $37 billion, marking a 123% year-on-year increase.
Microsoft Cloud gross margin declined to 66%, indicating continued pressure on the income statement, while free cash flow reached $15.8 billion.
Microsoft Chief Financial Officer Amy Hood said the company is “confident in the return on these investments.” She projected capital expenditures for the fourth quarter would exceed $40 billion. Microsoft
Alexis Bossard observes a similar shift. As global equities manager at Edmond de Rothschild Asset Management, he said, “Once they stop increasing their capex, it will definitely be a relief for hyperscalers.” Reuters
Alphabet is set to report on Wednesday. Investors will watch for signs that cloud demand continues to support significant AI investment.
Microsoft is scheduled to announce fourth-quarter financial results after markets close on July 29. The company expects revenue between $86.7 billion and $87.8 billion, with Azure’s constant-currency growth projected at 39% to 40%.
Risks: Capital expenditure relief may be delayed beyond investor expectations. Microsoft anticipates capacity limitations will persist into 2026, even as it moves forward with its planned investments. A slowdown in Azure’s growth could offset last week’s relative gains.
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