Microsoft's 403-Euro Close: The AI Rally That Wall Street Is Paying a Premium For
Published on 08/03/2026 at 06:51 | Redaktion boerse-global.de
When Microsoft's fourth-quarter numbers hit the tape on Wednesday, the market response was nothing short of historic. The stock surged more than 15 percent in a single session — the largest one-day market value gain ever recorded for any company — and by Friday's close in Frankfurt, shares had settled at 403.00 euros, up 3.03 percent on the day and 17.78 percent for the week. The weekly increase in market capitalization: roughly $617 billion.
The headline numbers justify much of the enthusiasm. Revenue came in at $90.01 billion, up about 18 percent year over year and ahead of the $87.62 billion consensus. Adjusted earnings per share of $4.74 beat the $4.24 estimate. Azure, the crown jewel of the company's AI ambitions, grew 43 percent in constant currency — its fastest clip since 2022 — and crossed the $100 billion annual revenue threshold for the first time. Management guided to roughly 45 percent Azure growth for the current quarter, well above the 40.92 percent the Street had penciled in.
But the most closely watched figure was the commercial backlog. Remaining performance obligations swelled 84 percent to $678 billion, with about 30 percent — roughly $203 billion — expected to convert to revenue within twelve months. Copilot's paying user base topped 30 million, while GitHub Copilot now counts 50 million users. That order book, more than any single metric, is what sent investors into a buying frenzy.
The Fine Print Behind the Beat
Dig beneath the surface, however, and the quality of the earnings surprise looks shakier than the chart suggests. Microsoft booked a $3.2 billion valuation gain from its stake in AI lab Anthropic, which contributed 33 cents to earnings per share. Against a total beat of roughly 50 cents over consensus, that means about two-thirds of the upside came from a one-time paper gain on a private investment — not from sold Azure capacity or Office licenses. The quarter's net income of $35.8 billion, or $4.81 per share, also reflected lower costs tied to the company's first voluntary early retirement program.
Should investors sell immediately? Or is it worth buying Microsoft?
The capex story deserves equal scrutiny. Microsoft lowered its investment guidance for calendar 2026 to roughly $175 billion, a move that initially read as capital discipline. CFO Amy Hood clarified, though, that the reduction stems entirely from an accounting reclassification: the company extended the estimated useful life of its data centers and office buildings from 15 to 25 years, pushing more future leases into the operating lease category. Only finance leases count toward reported capital expenditures. The underlying spending plans are unchanged, and Hood indicated investments will keep rising in fiscal 2027, citing persistent demand signals across the portfolio.
Meanwhile, the actual cash picture is deteriorating. Free cash flow fell 23 percent to $19.64 billion, a direct consequence of $41 billion in quarterly capital expenditures — roughly 45.6 percent of revenue. Microsoft opened 31 new data centers during the quarter, adding one gigawatt of capacity, a reminder of just how capital-intensive the AI arms race has become. Hood expects free cash flow to turn positive again in fiscal 2027, but for a stock trading at these levels, the slowdown is real.
A Chart Stretched Thin
The technical picture amplifies the tension. Microsoft now sits 16.26 percent above its 50-day moving average of 346.64 euros, with an RSI of 73.8 — firmly in overbought territory. Yet the stock remains nearly 16 percent below its October 2025 record high of 478.10 euros. The average analyst price target of 486.78 euros implies roughly 20.8 percent upside from current levels, suggesting the Street sees room to run despite the sharp recovery.
That optimism is reflected in a wave of post-earnings target hikes. Goldman Sachs reaffirmed its buy rating with a $640 target, JPMorgan holds an Overweight with a $550 target, and Evercore ISI and Wolfe Research sit between $528 and $550. Wells Fargo, Morgan Stanley, and Citi raised their targets to $650, $600, and $600 respectively, with the broader consensus range extending to $680. Nearly all analysts maintain buy ratings.
Beyond the Numbers
Microsoft also used the earnings window to unveil MAI-Cyber-1-Flash, a proprietary cybersecurity AI model, alongside a project called "Perception." The AI-powered cybersecurity market is currently valued at $44.2 billion, with projections exceeding $200 billion within a decade — a potential new growth pillar alongside Azure and Copilot.
Microsoft at a turning point? This analysis reveals what investors need to know now.
For the current quarter, Microsoft guided to revenue between $89.85 billion and $90.95 billion. If the projected 45 percent Azure growth materializes, the company's role as the engine of the AI trade seems secure for now.
The bull case is genuine: Azure's acceleration and a record backlog point to real demand, not spending for its own sake. But the composition of the latest report tells a more complicated story. A one-time valuation gain, an accounting change dressed up as cost discipline, and a shrinking free cash flow are not the usual ingredients for an 18 percent weekly rally. The market is pricing in near-perfect execution of the AI monetization story. When the accounting fog lifts and attention turns back to actual cash generation, there may be little room left for disappointment — or for error.
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Microsoft Stock: New Analysis - 3 August
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