Microsoft’s P/E Ratio Hits a 10-Year Low: Is It Time to Buy the Dip?
Microsoft is set to release its Q4 FY2026 earnings report after the market closes this Wednesday. According to analyst forecasts, Microsoft’s revenue in Q4 FY2026 is expected to reach $87.724 billion, representing a 14.8% year-over-year increase.
Adjusted EPS is projected to reach $4.25, up 16.4% year-over-year.
In terms of valuation, Microsoft’s current price-to-earnings ratio stands at 24.12, which is relatively low compared with its levels over the past decade.
Microsoft’s revenue is primarily generated from four major business segments: Productivity & Business Processes, including Office 365, LinkedIn, Dynamics, and so on; Intelligent Cloud; More Personal Computing, and Azure AI revenue. Among these, Intelligent Cloud revenue is expected to become the largest contributor to revenue.
Analysts estimate that Microsoft’s capital expenditure for this calendar year will exceed $190 billion. Despite this massive capital expenditure, the market views its growth momentum as lagging. This year, it has been the second-weakest-performing stock among the Mag Seven, with a decline of 21%.
Meanwhile, Microsoft is also working to improve the cost efficiency of its AI offerings. The company has reportedly begun replacing some OpenAI image-generation models with internally developed AI models across products such as PowerPoint and Bing. For example, in PowerPoint, the company’s in-house MAI model has operating costs approximately 85% lower than previous solutions.
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