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Microsoft (MSFT) · Q2 2026 results and valuation
Share price: $521.12 · 2026-11-11
Microsoft is a technology company that provides software, cloud computing, internet services, and video gaming. It operates globally and serves a wide range of customers through products like Windows and artificial intelligence. Source: Wikipedia
Results Q2 2026 vs Q1 2026 · previous quarter · fiscal Q4 2026
Net income up 12.5% on the previous quarter. Tone in line with last period.
1 · Numbers
+12.5%
Net income vs Q1 2026
Outlook given
Net income 35.77B vs 31.78B
Revenue +8.6%
Against the same quarter last year (Q2 2025) it is +31.3%, so it is not just seasonal.
Why Against the same quarter last year (+31.3%), net income rose primarily because operating income growth outpaced revenue growth, driven by strong demand for Azure and first-party AI applications and services, alongside expanding operating leverage and efficiency gains.
2 · How management spoke
Unchanged
Language tone vs last period
Language: typical — about as upbeat as in Q1 2026.
3 · What stood out
Microsoft expects Azure revenue growth of approximately 45% in constant currency while focusing on efficiencies to meet customer demand that currently exceeds supply.
Valuation
Is Microsoft undervalued?
Reverse DCF. Free cash flow from the last full fiscal year (2026-06-30), grown for 10 years, discounted back, plus a terminal value. “Implied growth” is the rate the current price assumes.
At 16.1% growth a year (3-year revenue growth), the model's fair value is $339.87 a share — the stock trades 53% above it. Today's price assumes 22.1% growth a year.
Current price
$521.12
close of 2026-11-11
Market implies growth of iThe yearly free-cash-flow growth, for the next 10 years, that today’s share price already assumes. If you believe the company grows faster than this, the stock is cheap under this model; slower, and it is expensive.
+22.1% for 10 yrs
Fair value / share
$339.87
Buy below
$254.90
Price vs fair value
Overvalued 53%
Price vs buy-below price
Overvalued 104%
Management expects
Revenue +45% · from the Q2 2026 report: “Microsoft expects Azure revenue growth of approximately 45% in constant currency while focusing on efficiencies to meet customer demand that currently exceeds…”
A guidance figure for revenue, usually one year ahead, not a 10-year free-cash-flow rate.
Read between the lines
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Figure
Microsoft Cloud revenue reached $59.3 billion and grew 27% due to demand across Azure and first-party AI applications and services.
Source quote
“Microsoft Cloud revenue was $59.3 billion and grew 27%, reflecting strong demand across Azure and our first-party AI applications and services.”
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Guidance
Microsoft expects Azure revenue growth of approximately 45% in constant currency while focusing on efficiencies to meet customer demand that currently exceeds supply.
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Figure
Annual revenue surpassed $331 billion, an increase of 18%, for the current period.
Source quote
“All up, our annual revenue surpassed $331 billion, up 18%.”
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Figure
Microsoft reported 100,000 Foundry customers and revenue that more than doubled year-over-year.
Source quote
“We now have 100,000 Foundry customers and revenue more than doubled year-over-year.”
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Figure
PostgreSQL revenue increased by 55% and accelerated for the third consecutive quarter.
Source quote
“PostgreSQL revenue was up 55%, accelerating for the third consecutive quarter.”
4 more
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Figure
Copilot revenue accelerated over 60% quarter-over-quarter, indicating a significant increase in growth for this product line compared to the previous quarter.
Source quote
“Copilot revenue accelerated over 60% quarter-over-quarter.”
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Figure
Operating income grew 21% to more than $155 billion because growth outpaced revenue as the company invested in long-term growth and expanded operating leverage.
Source quote
“Operating income growth outpaced revenue growth, increasing 21% to more than $155 billion as we invested in long-term growth while continuing to expand operating leverage.”
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Figure
Total company revenue is projected to be between USD 89.85 billion and USD 90.95 billion, representing 16% to 17% growth as accelerating commercial growth offsets PC market dynamics.
Source quote
“Therefore, at the total company level, revenue should be between USD 89.85 billion and USD 90.95 billion or growth of 16% to 17%, with accelerating commercial growth partially offset by the impact from the PC market dynamics noted earlier.”
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Guidance
Microsoft expects CapEx spend to be over $50 billion, which indicates the scale of planned capital expenditures.
Tone
How upbeat the language was, compared with other companiesiTone counts positive minus negative finance words, adjusted for length. Executives mostly speak positively, so the labels compare each call with every company's latest call: “typical” is the middle third, “very upbeat” the top tenth, “cautious” the bottom tenth.. Dot: Q2 2026. Ring: Q1 2026.
Typical — about as upbeat as in Q1 2026.
Sentences that drove the tone
“The work, frankly, on model diversification also is a margin improvement opportunity being able to serve the best possible outcome with a more efficient or both efficient in terms of...”
“With the premium SKU momentum and the increased monetization opportunity from adding usage-based billing products alongside per seat licensing in July, we expect to see acceleration in M365 Commercial cloud...”
“At the company level, with strong commercial momentum, we continue to expect another fiscal year of double-digit revenue and operating income growth.”
Full figures
USD · SEC EDGAR XBRL (10-Q, period end 2026-06-30)
| Metric | Q2 2026period end 2026-06-30 | Q1 2026period end 2026-03-31 | Change | Q2 2025 | YoY |
|---|---|---|---|---|---|
| Revenue | 90.01B | 82.89B | +8.6% | 76.44B | +17.7% |
| Gross profit | 60.48B | 56.06B | +7.9% | 52.43B | +15.4% |
| Operating income | 40.60B | 38.40B | +5.7% | 34.32B | +18.3% |
| Net income | 35.77B | 31.78B | +12.5% | 27.23B | +31.3% |
| EPS | 4.81 | 4.27 | +12.6% | 3.65 | +31.8% |
| P/E today 27.7 | 20.8 | 22.0 | −1.2 | 36.5 | −15.7 |
Topics
Most discussed now
- New Going forward, Microsoft has 2 goals; first, ensuring AI empowers every person, amplifying their agency, and ambition; and second…
- New As Microsoft thinks about the mix of the portfolio, being able to have a pretty broad pool across knowledge work,...
- Microsoft will also provide growth rates in constant currency, when available, as a framework for assessing how its underlying businesses...
- Microsoft is also bringing capacity online faster than ever.
- At the scale that Microsoft is operating in terms of across the entire hyperscale fleet, making efficiency improvements that can be...
Faded since Q1 2026
- Fading These 2 layers reinforce each other, and Microsoft is focused on driving competitive value and differentiation for customers across each...
- Fading This will drive TAM expansion and change the value creation equation across the entire economy.
- Fading Microsoft is at the beginning of one of the most consequential platform [ shifts ] that will change the entire...
- Fading Microsoft's Fairwater data center in Wisconsin came online earlier this month, 6 weeks ahead of schedule, allowing us to recognize...
Latest announcements
Official filings, newest first. Summaries are generated from each filing and its attachment; every figure is checked against the source.
- Director or officer change · SEC 8-K
- Other events · SEC 8-K
- Other events · SEC 8-K
- Results of operations · SEC 8-K
- Regulation FD disclosure · SEC 8-K
Microsoft announced it will transition from three reporting segments to two new segments, Agents and Infra and Devices and Consumer, starting in fiscal year 2027.
- Results of operations · SEC 8-K
Microsoft reported revenue of $90.0 billion, up 18% year-over-year, and net income of $35.8 billion, up 31% on a GAAP basis for the quarter ended June 30, 2026.
- Director or officer change · SEC 8-K
Reid Hoffman, a member of the Board of Directors since 2017, announced his decision not to stand for re-election at the 2026 annual shareholder meeting.
- Director or officer change · SEC 8-K
Microsoft announced the appointment of Carmine Di Sibio to its board of directors, expanding the board to 13 members.
Catalyst calendar
management-stated targets — from the latest earnings call; plans, not promises.
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in just 2 years
doubling overall capacity
Source quote
“All up, we added another gigawatt of capacity this quarter and remain on track to roughly double our overall capacity in just 2 years.”
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by the end of this month
having Cobalt 200 racks in over 25 data centers
Source quote
“And by the end of this month, we expect to have our Cobalt 200 racks in over 25 data centers around the world as we rapidly expand capacity.”
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fiscal 2027
return the business to growth
Source quote
“We have the best IP in the industry and talented studios around the world, and believe we can bring these strengths together and expect to return the business to growth in fiscal 2027.”
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next 12 months
recognition of roughly 30% of RPO in revenue
Source quote
“RPO, including OpenAI, has a weighted average duration of 2.3 years and roughly 30% will be recognized in revenue in the next 12 months, up 37% year-over-year.”
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effective at the start of FY '27
extending the estimated useful life of our data centers and office buildings from 15 to 25 years
Source quote
“effective at the start of FY '27, we are extending the estimated useful life of our data centers and office buildings from 15 to 25 years, reflecting our operating history and expected use of these assets.”