I hit the buy button on Microsoft (NASDAQ:MSFT | MSFT Price Prediction) again this week, and I have no intention of stopping.
What keeps pulling me back is simple. This is a company charging customers for AI at scale while expanding margins, and the market keeps handing me chances to buy it cheaper. Microsoft closed at $390.54 on July 29, down 23.2% over the last year and 18.89% year to date. That is the setup I keep getting rewarded for accumulating into.
The Quarter That Convinced Me to Add Again
Microsoft reported Q4 FY26 non-GAAP EPS of $4.74 against a $4.2397 estimate, an 11.81% beat and the fifth straight quarter of beating consensus. Revenue landed at $90.007 billion, up 17.75% year over year. What made me add was the shape of the beat.
Net income grew 31.33% on revenue growth of 17.75%. That is operating leverage most cloud businesses cannot show while spending $115.95 billion in annual capex on AI infrastructure. Operating margin came in at 45.62%, ROE at 33.28%, and interest coverage sits at 53.89x. Those are the fingerprints of a business monetizing AI at the same time it funds it.
Three Reasons the Thesis Holds
First, Azure. Azure grew 43% year over year and crossed $100 billion in full-year revenue for the first time. A scale milestone I did not expect this fiscal year.
Second, the backlog. Commercial remaining performance obligations reached $678 billion, up 84% year over year. That is contracted future revenue and visibility I get from almost no other mega-cap I own.
Third, adoption. Microsoft 365 Copilot passed 30 million paid seats. CEO Satya Nadella framed it on the release: “This year, Azure revenue surpassed $100 billion for the first time, and Microsoft 365 Copilot reached over 30 million paid seats, reflecting the confidence customers are placing in us to power their AI transformation.”
Why Not Amazon or Alphabet?
The two names a reader reaches for first are Amazon (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOGL). I own some of both. I keep adding to Microsoft because of what its filings actually show: a 45.62% operating margin, a 68.82% gross margin, and net debt to EBITDA of 0.187. Microsoft is running one of the highest-margin, lowest-leverage AI franchises at trillion-dollar scale, and the $678 billion RPO gives me a revenue runway I have yet to see quantified this cleanly elsewhere.
The Risk I Am Not Ignoring
Free cash flow is the concern. Q4 free cash flow was $19.639 billion, down 23.19% year over year, and full-year capex jumped to $115.95 billion, up 79.62%. If AI demand softens, that spending stops looking like investment. What keeps me buying is the RPO figure and the Copilot seat count. Contracted demand is showing up first, and the capex is chasing paid customers.
Why the Buy Button Stays Active
The stock closed flat at $390.54 on the day of an 11.81% earnings beat. Ten-year total return sits at 679.33%. When a business compounding like this hands me weakness after a report like this one, my job as a long-term holder is to keep showing up.
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