QS Research · Michael Burry's Scion Capital analyst template · 2006
MICROSOFT CORP (MSFT)
As of 2026-11-08 · 13/15 boxes filled from SEC filings and market data
Conclusion: PASS
Conviction medium · base case 0% · downside -21% · upside +21%
Microsoft's operating momentum is real: Q1 FY2027 revenue was $92.279B, up 19%, operating income was $45.915B, up 21%, Microsoft Cloud was $63.9B, up 30%, Azure rose 48%, and commercial RPO rose 73% to $677B [S29, S31]. But at $530.61 the market already pays 11.30x EV/Sales, 19.0x EV/EBITDA and 27.6x P/E on TTM revenue $346.44B, EBITDA $205.69B and net income $142.63B [N1, N28, N29, N32, N11, N15, N16]. At today's 19.0x EV/EBITDA, 19.0 x $205.69B = $3,908.11B EV + $24.64B net cash = $3,932.75B equity / 7,426.19M shares = about $529.58, roughly today's price; 15.0x gives about $419 (-21%) and 23.0x gives about $640 (+21%) [N15, N25, N5]. With capex of $135.92B against operating cash flow of $195.88B leaving FCF of $59.96B and a 1.5% FCF yield, the risk/reward is symmetric and there is no deep-value edge, so I pass [N17, N18, N19, N33].
Key numbers
- Share price: $530.61
- Market cap: $3,940.41B
- Latest financial period: TTM to Sep 30, 2026
- Revenue (TTM): $346.44B
- EV / EBITDA (TTM): 19.0x
- P/E (TTM): 27.6x
- Price / book: 8.37x
The 15 boxes
- ✓ 1. Long-form business notes
Microsoft sells three ways: subscription seats (Microsoft 365 Commercial/Consumer, LinkedIn, Dynamics), metered cloud consumption (Azure and other cloud services), and per-device/per-user licensing plus advertising and content (Windows OEM, Devices, XBOX, Search advertising). Between the FY2021 and FY2026 10-Ks the company doubled revenue from $168.09B to $331.84B and lifted operating income from $69.92B to $155.24B, but the largest structural change is capital intensity: capex went from $20.62B (FY2021) to $115.95B (FY2026) and depreciation from $9.30B to $34.30B, funded by operating cash flow of $182.94B in FY2026. The narrative also changed from 'intelligent cloud and intelligent edge' (FY2021) to an AI-everywhere framing (FY2026 10-K, dated 2026-07-29). These sources carry no segment revenue or profit dollars, no quarterly/nine-month/TTM figures and no guidance, so current-earnings valuation inputs are not in this pack.
- ✓ 2. Competitive advantage
The record points to a durable but not unassailable advantage built on scale and ecosystem rather than on price: FY2026 revenue $331.84B, operating income $155.24B and net income $133.75B, with operating margin roughly 46.8% versus 41.6% in FY2021 (computed from the XBRL table). The company itself describes network effects, developer ecosystems and switching costs as its defence, while conceding that "Barriers to entry in many of our businesses are low." The moat is now being rebuilt with capital — FY2026 capex of $115.95B, about 34.9% of revenue versus 12.3% in FY2021 — which is both the barrier to matching Microsoft and the largest risk the FY2026 10-K adds.
- ✓ 3. 10-Q takeaways
Q1 FY2027 (three months ended Sep 30, 2026) revenue was $92.279B, up 19% Y/Y, and operating income was $45.915B, up 21%, led by Agents and Infra (+25%) and Microsoft Cloud (+30%, Azure +48%, commercial RPO +73% to $677B). GAAP diluted EPS was $4.92 and included a $0.03 OpenAI investment gain; adjusted diluted EPS was $4.89, up 18%. Cash from operations was $58.0B for the quarter, buybacks were $2.9B, and neither the 10-Q nor the same-quarter release gave numeric forward guidance.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ✓ 11. Impression of the shareholder letter
Filled; members read this box.
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
Sign in with a QuantSignals Premium or Gold plan to read every box: each point linked to the SEC filing it came from, the bull and bear case, and the comparables. QS Research powers the signals behind FST, our autonomous trading agent.