Is Microsoft stock a buy after Q1 FY2027 earnings?

HOLD: Microsoft is worth $520.97, in line with the $520.99 price, after Azure grew 48.2%.

Microsoft · Q1 FY2027 · Published Nov 5, 2026 · Data cut-off: 2026-10-26 · By DeepCell AI · Sources

1 · Cover

HOLD: Microsoft is worth $520.97, in line with the $520.99 price, after Azure grew 48%

The Azure beat closed the gap to the price. We would buy at $453.02 or below and sell above $578.86.

HOLD
Base value per share $520.97 up from $478.62 before results
Price, 3 November close $520.99 $524.51 before results
Value if Azure holds its pace $547 short of the $599 a BUY needs
Average analyst target $602 above every growth case we model
Azure earned the higher value.

It grew 48% against our 45%, and the model carries that into every later year.

The shares already pay for it.

At 26.5x FY2027E earnings and a 0.5% free cash flow yield, there is no margin of safety.

Capex is why this is not a BUY.

Spending takes most of the operating cash flow. If it fails to earn its return, the value is $312.

Source: Microsoft FY27 Q1 press release (28 October 2026) · stockanalysis.com — MSFT daily price history (close 3 November 2026) · stockanalysis.com — MSFT analyst forecast (S&P Global consensus)

2 / 10

2 · Our view

Q1 beat the guide and consensus: revenue of $92,279M and EPS of $4.89

Revenue and EPS came in above consensus and above our forecast, and Azure came in above the guide.

Exhibit 1: Revenue by quarter, FY2026 to Q1 FY2027

USD millions, restated; the grey bar is reported Q1, the dashed line the guide

Total revenue · Q1 FY2026A: $77,673Total revenue · Q2 FY2026A: $81,273Total revenue · Q3 FY2026A: $82,886Total revenue · Q4 FY2026A: $90,007Total revenue · Q1 FY2027: $92,279$0$25,000$50,000$75,000$100,000Q1 FY2026AQ2 FY2026AQ3 FY2026AQ4 FY2026AQ1 FY2027$77,673$81,273$82,886$90,007$92,279Q1 guide: $90,400

Exhibit 2: Q1 FY2027: reported against expectations

The guide, consensus, our forecast before results, and the reported figure

USD millions
Q1 FY2027 · GuidanceQ1 FY2027 · ConsensusQ1 FY2027 · Our forecastQ1 FY2027 · Actual
Total revenue$M90,400.090,620.090,714.592,279.0
Azure revenue growth (y/y)%44.5%45.0%48.2%
Diluted EPS excluding OpenAI (non-GAAP)$4.714.734.89

Margin beat too. Operating margin was 49.8% against a guided 48.5%; capex including finance leases was $45,200M, under the guide of more than $50,000M.

Source: Microsoft FY27 Q1 press release (28 October 2026) · SiliconANGLE — Microsoft's stock rises on solid earnings and revenue beat, with Azure growing 48% (28 October 2026) · TradingKey — Microsoft stock forecast: Q1 earnings preview (23 October 2026)

3 / 10

3 · Q1 results

Azure grew 48.2% against our 45.0%, and that lifted the value to $520.97

Growth stepped up again from FY2026, and Azure is the line that carries the valuation.

Exhibit 3: Azure growth by quarter

Year on year, restated to the FY2027 definition; the line is our forecast before results

Azure revenue growth (y/y) · Q2 FY2026A: 39%Azure revenue growth (y/y) · Q3 FY2026A: 40%Azure revenue growth (y/y) · Q4 FY2026A: 42%Azure revenue growth (y/y) · Q1 FY2027: 48%36%38%40%43%45%48%50%Q1 FY2026AQ2 FY2026AQ3 FY2026AQ4 FY2026AQ1 FY202740%39%40%42%Our forecast before results: 45%Azure revenue growth (y/y) · Q1 FY2026A: 40%Azure revenue growth (y/y) · Q2 FY2026A: 39%Azure revenue growth (y/y) · Q3 FY2026A: 40%Azure revenue growth (y/y) · Q4 FY2026A: 42%Azure revenue growth (y/y) · Q1 FY2027: 48%
Q1 Azure growth, reported 48% guide 44.5%, our forecast 45%
Azure revenue, Q1 FY2027 $33,165M from $22,384M a year earlier

The beat is worth more than one quarter. Q1 growth sets the starting point for every later year, which moved the base value from $478.62 to $520.97.

Source: Microsoft FY27 Q1 press release (28 October 2026) · Microsoft FY27 Segments and Investor Metrics (Form 8-K Exhibit 99.1, 2 September 2026) — restated historical financials

4 / 10

4 · Azure

Agents and Infra reached $76,795.0M in the first quarter on the new segments; Devices and Consumer shrank

This is the first quarter on the new structure, and the restated history is what it is measured against.

Exhibit 4: Agents and Infra against Devices and Consumer, FY2025A to FY2032E

USD billions; Agents and Infra split into Azure and the rest; total revenue above each column

Azure · FY2025A: $73Azure · FY2026A: $102Azure · FY2027E: $150Azure · FY2028E: $209Azure · FY2029E: $276Azure · FY2030E: $348Azure · FY2031E: $422Azure · FY2032E: $494Microsoft 365 cloud, licensing, Industry solutions and services · FY2025A: $146Microsoft 365 cloud, licensing, Industry solutions and services · FY2026A: $166Microsoft 365 cloud, licensing, Industry solutions and services · FY2027E: $183Microsoft 365 cloud, licensing, Industry solutions and services · FY2028E: $199Microsoft 365 cloud, licensing, Industry solutions and services · FY2029E: $215Microsoft 365 cloud, licensing, Industry solutions and services · FY2030E: $230Microsoft 365 cloud, licensing, Industry solutions and services · FY2031E: $244Microsoft 365 cloud, licensing, Industry solutions and services · FY2032E: $256Devices and Consumer · FY2025A: $63Devices and Consumer · FY2026A: $64Devices and Consumer · FY2027E: $61Devices and Consumer · FY2028E: $62Devices and Consumer · FY2029E: $64Devices and Consumer · FY2030E: $65Devices and Consumer · FY2031E: $66Devices and Consumer · FY2032E: $68FY2025AFY2026AFY2027EFY2028EFY2029EFY2030EFY2031EFY2032E$0$250$500$750$1,000$282$332$394$470$555$643$732$818ForecastAzureMicrosoft 365 cloud, licensing, Industry solutions and servicesDevices and Consumer
Azure share of revenue, FY2027E 38% the segment the valuation rests on

Agents and Infra is the business: Azure, Microsoft 365 cloud, licensing, Industry solutions and services. Devices and Consumer is Windows, XBOX and advertising.

Source: Microsoft FY27 Q1 press release (28 October 2026) · Microsoft FY27 Segments and Investor Metrics (Form 8-K Exhibit 99.1, 2 September 2026) — restated historical financials

5 / 10

5 · Segments

Capex at 50.0% of revenue pushes depreciation into the margin

This is the cost side of the Azure case. Depreciation follows capex with a lag, and gross margin carries it.

Exhibit 5: Capex against depreciation, FY2022A to FY2032E

Share of revenue; capex goes from 35% of revenue in FY2026 to 50% in FY2027E

Additions to property and equipment, % of revenue · FY2023A: 13%Additions to property and equipment, % of revenue · FY2024A: 18%Additions to property and equipment, % of revenue · FY2025A: 23%Additions to property and equipment, % of revenue · FY2026A: 35%Additions to property and equipment, % of revenue · FY2027E: 50%Additions to property and equipment, % of revenue · FY2028E: 44%Additions to property and equipment, % of revenue · FY2029E: 36%Additions to property and equipment, % of revenue · FY2030E: 29%Additions to property and equipment, % of revenue · FY2031E: 24%Additions to property and equipment, % of revenue · FY2032E: 21%Depreciation, amortization and other, % of revenue · FY2023A: 7%Depreciation, amortization and other, % of revenue · FY2024A: 9%Depreciation, amortization and other, % of revenue · FY2025A: 12%Depreciation, amortization and other, % of revenue · FY2026A: 12%Depreciation, amortization and other, % of revenue · FY2027E: 14%Depreciation, amortization and other, % of revenue · FY2028E: 17%Depreciation, amortization and other, % of revenue · FY2029E: 18%Depreciation, amortization and other, % of revenue · FY2030E: 19%Depreciation, amortization and other, % of revenue · FY2031E: 18%Depreciation, amortization and other, % of revenue · FY2032E: 17%0%20%40%60%FY2022AFY2023AFY2024AFY2025AFY2026AFY2027EFY2028EFY2029EFY2030EFY2031EFY2032E12%50%21%7%19%17%ForecastAdditions to property and equipment, % of revenueDepreciation, amortization and other, % of revenueAdditions to property and equipment, % of revenue · FY2022A: 12%Additions to property and equipment, % of revenue · FY2023A: 13%Additions to property and equipment, % of revenue · FY2024A: 18%Additions to property and equipment, % of revenue · FY2025A: 23%Additions to property and equipment, % of revenue · FY2026A: 35%Additions to property and equipment, % of revenue · FY2027E: 50%Additions to property and equipment, % of revenue · FY2028E: 44%Additions to property and equipment, % of revenue · FY2029E: 36%Additions to property and equipment, % of revenue · FY2030E: 29%Additions to property and equipment, % of revenue · FY2031E: 24%Additions to property and equipment, % of revenue · FY2032E: 21%Depreciation, amortization and other, % of revenue · FY2022A: 7%Depreciation, amortization and other, % of revenue · FY2023A: 7%Depreciation, amortization and other, % of revenue · FY2024A: 9%Depreciation, amortization and other, % of revenue · FY2025A: 12%Depreciation, amortization and other, % of revenue · FY2026A: 12%Depreciation, amortization and other, % of revenue · FY2027E: 14%Depreciation, amortization and other, % of revenue · FY2028E: 17%Depreciation, amortization and other, % of revenue · FY2029E: 18%Depreciation, amortization and other, % of revenue · FY2030E: 19%Depreciation, amortization and other, % of revenue · FY2031E: 18%Depreciation, amortization and other, % of revenue · FY2032E: 17%
Gross margin, FY2029E 62.6% from 67.9% in FY2026; operating margin holds at 46.8% this year
Unlevered free cash flow, FY2027E $20,136M a 0.5% yield on the market value

Source: Microsoft Corporation Form 10-K (fiscal year ended 2026-06-30, filed 2026-07-29) — Income Statements · Microsoft FY2026 Q4 earnings conference call transcript (Microsoft Investor Relations, 29 July 2026)

6 / 10

6 · Capex

GAAP earnings carry OpenAI; this model does not

OpenAI gains and losses run through other income. The forecast leaves them out and values the stake separately.

Exhibit 6: FY2026 net income, GAAP to excluding OpenAI

USD billions, after tax; the axis is broken below net income so the OpenAI step can be read

FY2026A · Net income: $134FY2026A · Net income: $134FY2026A · OpenAI taken out of net income: -$5FY2026A · Net income excluding OpenAI (non-GAAP): $129FY2026A · Net income excluding OpenAI (non-GAAP): $129Net incomeOpenAI taken out of netincomeNet income excluding OpenAI(non-GAAP)$134-$5$129
FY2026 EPS without OpenAI $17.28 $17.95 as reported
OpenAI stake in the value $9.07 a share, after a haircut to its stated value

The Q1 beat was operating. GAAP EPS of $4.92 was $4.89 without OpenAI, so the investment added almost nothing to the quarter.

Source: Microsoft Form 10-K FY2026 — Non-GAAP financial measures: impact from investments in OpenAI (FY2024 to FY2026) · Microsoft FY27 Q1 press release (28 October 2026)

7 / 10

7 · Earnings quality

The base DCF now matches the price, and every growth case stays inside the HOLD range

Azure holding its pace and Azure fading early both leave this a HOLD. Only capex without the return breaks it.

Exhibit 7: Value per share by case, against the price and the HOLD line

USD per share; base on WACC 9.4% and terminal growth 3.5%; the marker in the worlds band is Azure fading early

Low · DCF: base case to exit-multiple bound: $521Point value · DCF: base case to exit-multiple bound: $521Low · Forward cases: capex without the return to Azure holding its pace: $312Point value · Forward cases: capex without the return to Azure holding its pace: $496DCF: base case to exit-multiple boundForward cases: capex without the return toAzure holding its pace$250$300$400$500$600$700$750$521–$765$312–$547HOLD from: $469Price: $521Street target: $602

Fair value, with no margin of safety. The 15x exit multiple gives $765, an upper bound and not a target; the price is 26.5x FY2027E earnings.

Sources: rate, FRED series DGS10 — 10-Year Treasury Constant Maturity Rate · terminal growth, Federal Reserve — Summary of Economic Projections, 16 September 2026 (Table 1, longer-run medians) · stockanalysis.com — MSFT analyst forecast (S&P Global consensus)

8 / 10

8 · Valuation

What would change the rating from here

Price or a broken capex return moves the rating. A normal range of Azure outcomes does not.

If we see Value per share Rating
Shares at $453.02 or below The base, 15% above the price BUY
Shares above $578.86 The base, more than 10% below the price SELL
Azure holds its pace through FY2027 $547 HOLD. BUY needs $599 at this price
Azure fades earlier than we model $496 HOLD. SELL starts below $469
Capex stays this heavy without the growth $312 SELL

HOLD. The shares are at fair value, and the next test is whether Q2 delivers Azure growth of 49% to 50%.

Source: SiliconANGLE — Microsoft's stock rises on solid earnings and revenue beat, with Azure growing 48% (28 October 2026) · values from the scenario worlds and the rating rule

9 / 10

9 · What would change the rating

What we said and what happened: HOLD stood, and the value rose

Before results we set the line for HOLD at Azure growth of 45%. Azure cleared it.

We said HOLD before results.

The base value then sat below the $524.51 price, inside the HOLD range.

Value before results $478.62 on Azure growth of 45%
Azure beat, and the rating held.

The beat raised the value to the price. It did not create a reason to buy.

Value now $520.97 on Azure growth of 48%
The next test is Q2.

Management guided Azure growth of 49% to 50% and revenue of $96.0B to $97.1B. Delivering that would run ahead of this model.

Source: Microsoft FY27 Q1 press release (28 October 2026) · SiliconANGLE — Microsoft's stock rises on solid earnings and revenue beat, with Azure growing 48% (28 October 2026)

10 / 10

10 · What we said and what happened

Sources

Not investment advice. Any rating here is this model's view of value against price at the data cut-off.

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