MSFT changes
Pick any two versions below to diff them.
- Price
- $516.17 → $512.90(−0.6%)
- Discount
- 14.0% → 14.5%(+0.5 pts)
- Next earnings is estimate
- No → Yes
- Thesis
- The market discounts Microsoft mainly because of its record AI data center spending. Microsoft plans to keep raising capital spending into fiscal 2027, after spending about $41 billion in one quarter. Investors worry this spending will weigh on free cash flow for years before it pays off. For the gap to close, Azure revenue growth must keep outrunning new data center capacity. That would show the spending is buying revenue rather than just cost. Azure growth already reached 43% in the June 2026 quarter. Management says Azure remains capacity-constrained, which points to unmet demand rather than overspending. Microsoft has also reduced its dependence on one AI partner. OpenAI committed to buy $250 billion of Azure services through 2032, and Microsoft now offers Anthropic's Claude models inside Copilot alongside OpenAI's models. In September 2026, Microsoft revamped Copilot with new code-generation and agentic AI tools. It also confirmed that Azure customers already use OpenAI's newest GPT-6 Astra model. Both are signs of AI products turning into paid, differentiated use rather than just cost. Microsoft reportsis expected to report fiscal Q1 2027 results onaround October 27, 2026. That report will show whether Azure growth and margins hold up as spending keeps rising. If Azure keeps growing near its current pace through mid-2027, the discount can close over the next two to four quarters.