Microsoft (MSFT) — Q4 FY26 Earnings Preview
Key Points and Summary
- Consensus expects Q4 FY26 revenue of $87.7B (+13% to +15% YoY), EPS of $4.21.
- Guidance calls for Q4 FY26 revenue of $86.7B–$87.8B, COGS of $29.4B–$29.6B, operating expense of $19.3B–$19.4B, and operating margin up ~1pt YoY for FY26.
- Azure and Cloud remain the primary growth engines; Azure guided to +39% to +40% YoY in constant currency.
- AI business annualized run rate surpassed $37B (+123% YoY in Q3).
- Microsoft 365 Copilot paid seats now over 20M, with accelerating sequential growth.
- CapEx is a major focus: FY26 expected at ~$190B, with >$40B in Q4 alone, driven by AI/Cloud demand and higher component pricing.
- Gross margin pressure from AI investments and higher component costs, but management expects ongoing efficiency gains and margin expansion.
- Q4 faces a tough YoY comp in More Personal Computing (Windows OEM and Devices), with guidance for mid- to high-teens revenue declines.
- Key watch items: Azure growth, Copilot adoption/ARPU, CapEx trajectory, margin trends, and durability/diversification of backlog (notably OpenAI exposure).
