Microsoft MSFT is slated to report fourth-quarter fiscal 2026 results on July 29.
For the fourth quarter of fiscal 2026, Microsoft expects total company revenues between $86.7 billion and $87.8 billion, suggesting growth of 13% to 15%, with accelerating commercial growth partially offset by the consumer business.
The Zacks Consensus Estimate for revenues is pegged at $87.42 billion, indicating growth of 14.36% from the figure reported in the year-ago quarter.
Capital expenditures are expected to increase to more than $40 billion in the fiscal fourth quarter, with the sequential increase including roughly $5 billion from higher component pricing as well as the impact from finance leases. The mix of short-lived assets is expected to remain similar to third-quarter levels.
The consensus mark for earnings has moved south by 0.2% to $4.21 per share over the past 30 days. The figure suggests 15.34% growth year over year.
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MSFT Earnings Surprise History
In the last reported quarter, the company delivered an earnings surprise of 4.91%. The company’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 8.43%.
Microsoft Corporation Price and EPS Surprise
Microsoft Corporation price-eps-surprise | Microsoft Corporation Quote
Earnings Whispers for MSFT
Our proven model does not conclusively predict an earnings beat for Microsoft this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. This is not the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
MSFT has an Earnings ESP of -1.04% and a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Factors Shaping MSFT’s Upcoming Q4 Results
Microsoft's fourth-quarter fiscal 2026 results are likely to reflect continued Azure capacity expansion and broadening AI monetization, weighed against escalating infrastructure costs and a softening PC market, during the April–June 2026 period.
Microsoft guided Productivity and Business Processes revenues of $37 billion to $37.3 billion, implying growth of roughly 12% to 13%, with the Zacks Consensus Estimate indicating 12.2% year-over-year growth to $37.16 billion. Microsoft 365 Commercial cloud growth is guided at 15% to 16% in constant currency. This followed a third-quarter beat in which the segment rose 17% to $35.0 billion, driven by Microsoft 365 Commercial cloud growth of 19%. Through the quarter, Microsoft continued layering AI into its productivity stack: Copilot Notebooks gained Excel-agent spreadsheet generation and auto-generated infographics, Copilot arrived in Apple CarPlay, and GPT-5.5 Instant and Claude Opus 4.7 were added as model choices inside Microsoft 365 Copilot and Copilot Studio. The May 1 general availability of Microsoft 365 E7, alongside a new three-year Copilot purchasing option in CSP, aimed to widen enterprise adoption. LinkedIn revenue growth was guided near 10%, while Dynamics 365 growth was guided in the low double digits, decelerating sequentially against a tough prior-year comparison.
The Intelligent Cloud segment remained the central growth and constraint story. Management guided revenues of $37.95 billion to $38.25 billion, or 27% to 28% growth. The consensus mark for this segment is pegged at $38.1 billion, indicating growth of 27.6% from the figure reported in the year-ago quarter.
Azure constant-currency growth is guided at 39% to 40%, similar to the 39% cc growth (40% reported) delivered in the fiscal third quarter, when Azure benefited from an AI business annualized run rate exceeding $37 billion, up 123% year over year. Management reiterated that capacity constraints would persist through 2026, with only modest easing expected in the second half. Infrastructure investment accelerated further during the quarter: Microsoft announced a new multibillion-dollar datacenter campus in Pecos, Texas, alongside continued buildout of its Fairwater AI "superfactory" network linking Wisconsin, Atlanta, and Phoenix-area sites. Capital expenditures, including finance leases, are expected to exceed $40 billion for the quarter, part of a roughly $190 billion calendar-2026 total, reflecting elevated memory and component pricing. This capex trajectory is expected to compress operating margin, which management guided down to roughly 44% from 46.3% in the prior quarter.
Microsoft guided More Personal Computing revenues of $11.75 billion to $12.25 billion, with the Zacks Consensus Estimate indicating a 10.5% year-over-year decline to $12.03 billion. Windows OEM and devices revenues are expected to be down in the mid-to-high teens and Xbox content and services revenues down in the low teens, reflecting a tough prior-year gaming comparison. Search and news advertising ex-TAC growth was guided in the high single digits.
On the gaming side, Microsoft cut Xbox Game Pass Ultimate pricing on April 21, while Build 2026 in June brought Microsoft Scout, an "Autopilot" agent, alongside general availability of Copilot Cowork and Claude's addition as a model option in Copilot Chat.
According to IDC results, second-quarter 2026 worldwide PC shipments reached 68.2 million units, down 4.9% year over year — the first decline after nine consecutive quarters of growth, as a memory-chip shortage pushed prices higher, with IDC projecting a steeper 20% year-over-year drop by the fourth quarter. Lenovo LNVGY, Dell Technologies DELL and HP Inc. HPQ witnessed shipment declines of 2.1%, 9% and 5%, respectively, year over year.
Overall, operating margin is expected to decline year over year as AI infrastructure spending continues to outpace near-term efficiency gains, even as cloud and AI demand remain robust.
MSFT Price Performance & Stock Valuation
Shares of MSFT have lost 18.8% in the past six-month period against the broader Zacks Computer & Technology sector’s growth of 8.7%. Shares of DELL, HPQ and LNVGY have gained 279%, 26% and 174.7%, respectively, in the same time frame.
6-Month Performance
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Now, let’s look at the value Microsoft offers investors at current levels. MSFT is trading at a premium with a forward 12-month P/S of 7.34X compared with the Zacks Computer - Software industry’s 4.98X, reflecting a stretched valuation. Microsoft carries a Value Score of C.
MSFT’s P/S F12M Ratio Depicts Stretched Valuation
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Investment Thesis
Microsoft enters fourth-quarter fiscal 2026 results with robust Azure demand, guided at 39-40% constant-currency growth, and expanding AI monetization, yet capacity constraints persist through calendar 2026 alongside elevated capital expenditure exceeding $190 billion annually, pressuring operating margins toward 44%. Productivity and Business Processes growth is decelerating, while More Personal Computing faces a weakening PC market amid memory-chip shortages and declining Xbox hardware demand. Given Microsoft's premium valuation relative to peers and intensifying competition across cloud, AI and productivity software from Google, Amazon, and OpenAI-aligned rivals, investors may consider holding existing positions or awaiting a more attractive entry point rather than initiating new exposure ahead of results.
Conclusion
Microsoft's fourth-quarter fiscal 2026 outlook reflects strong Azure and AI-driven cloud momentum, tempered by capacity constraints, rising capital expenditure and margin pressure. With Productivity growth moderating and the PC market softening, near-term results carry mixed risk-reward. Given the stock's premium valuation and intensifying competitive dynamics, investors may prefer to hold current positions or await a more favorable entry point before adding exposure.
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This article originally published on Zacks Investment Research (zacks.com).