Michael Kramer: How to Analyse Microsoft Before Earnings
Microsoft’s earnings history, capital expenditure, free cash flow, Azure growth, options-implied moves and valuation multiples provide historical context ahead of the company’s fiscal fourth-quarter results on 29 July; however, they do not predict future outcomes.
Earnings History
Microsoft’s quarterly results have beaten analysts’ forecasts, with EPS missing estimates only once over the last 21 quarters, in the fiscal fourth quarter of 2022. Over the same period, revenue beat estimates in 19 of the past 21 quarters, missing only twice. Across the positive surprises, EPS exceeded the consensus mean estimate by an average of 6.6%. Positive revenue surprises averaged 2.1%.
(Source: LSEG, as of 17 July 2026. Calculations based on LSEG data)
(Past performance is not a reliable indicator of future results)
Microsoft’s capital expenditures have risen from around $6.3 billion in the first quarter of 2023 to $13.9 billion in the fourth quarter of 2024. Since then, it has continued to climb, reaching $30.9 billion in the fiscal third quarter of 2026.
(Source: LSEG, as of 17 July 2026. Calculations based on LSEG data)
(Past performance is not a reliable indicator of future results)
Capex has increased from less than $20 billion on a trailing twelve-month basis in fiscal year 2022 to nearly $100 billion in fiscal year 2026. The data also shows that Microsoft’s spending in the last two quarters was approximately $30 billion per quarter.
(Source: LSEG, as of 17 July 2026. Calculations based on LSEG data)
(Past performance is not a reliable indicator of future results)
Free cash flow on a trailing twelve-month basis has risen for Microsoft from $55 billion in fiscal 2022 to $72.9 billion in the fiscal third quarter of 2026, peaking at $78 billion in the fiscal first quarter of 2026.
(Source: LSEG, as of 17 July 2026. Calculations based on LSEG data)
(Past performance is not a reliable indicator of future results)
Azure revenue grew by 40% in the fiscal third quarter of 2026, up from 39% in the fiscal second quarter. Both figures were higher than a year earlier, when growth was 33% in the fiscal third quarter of 2025 and 31% in the fiscal second quarter of 2025. From fiscal first quarter of 2024 through fiscal third quarter of 2026, Azure growth ranged from 29% to 40%, remaining at the upper end of that range over the latest four quarters.
(Source: Microsoft company earnings releases (Azure and other cloud service revenue growth) as of 17 July 2026)
(Past performance is not a reliable indicator of future results)
Options-Implied Earnings Range
Option prices can be used to calculate an implied trading range around an earnings announcement. Across the ten announcements shown, the one-week at-the-money options implied an average post-earnings move of ±6.8%, compared with an actual realised average of 4.6%. The next-session share-price move remained within the calculated range in seven cases and was outside it in three.
The implied range was estimated from the one-week at-the-money implied volatility observed at the close on the day of the earnings announcement, scaled to the option's one-week term (implied volatility × √(7/365)) and applied to the share price. This yields a one-standard-deviation range based on option prices. It does not constitute a forecast or imply a direction for the share-price move.
(Source: LSEG, as of 17 July 2026. Calculations based on LSEG data)
(Past performance is not a reliable indicator of future results)
Valuation Metrics
As of 17 July 2026, Microsoft’s forward price-to-earnings ratio, based on analysts’ estimates for the next twelve months, is 20.3. From June 2021 to July 2026, Microsoft's average P/E was 28.7, and its median was 29.7, so its P/E is currently below both its historical average and median for the period.
Historical valuation multiples provide context for how the market has priced the company over time. These historical comparisons do not indicate whether the shares are currently overvalued or undervalued.
(Source: LSEG, as of 17 July 2026. Calculations based on LSEG data)
(Past performance is not a reliable indicator of future results)
As of 17 July 2026, Microsoft’s forward price-to-sales ratio, based on analysts’ consensus next-twelve-month revenue estimates, is 7.8. From June 2021 to July 2026, its average P/S ratio was 10.0, and its median was 10.2, so the ratio is currently below both the historical average and the median for the period.
(Source: LSEG, as of 17 July 2026. Calculations based on LSEG data)
(Past performance is not a reliable indicator of future results)
Over the period shown, Microsoft’s trailing-12-month EPS recorded an average year-over-year growth rate of 19.1%, with a median of 19.4%. Revenue growth averaged 14.8%, with a median of 15.3%. In the fiscal third quarter of 2026, the corresponding figures were 25.1% for EPS growth and 17.9% for revenue growth, both above their historical averages and medians.
(Source: LSEG, as of 17 July 2026. Calculations based on LSEG data)
(Past performance is not a reliable indicator of future results)
The charts and data provide historical context for Microsoft’s financial performance, capital expenditure, free cash flow, and the past growth rate of its Azure cloud unit. Over the 21 quarters shown, the company reported better-than-expected EPS in 20 quarters and revenue in 19. In seven of the ten earnings announcements analysed, Microsoft’s next-session share-price move remained within the options-implied range. Its current forward price-to-earnings and price-to-sales ratios are also below their respective averages and medians over the five-year period shown. These observations do not indicate how Microsoft’s forthcoming results or share price may perform, as past performance is not indicative of future results.