3 Major Reasons to Buy Microsoft Before July 29 Q4 Earnings

3 Major Reasons to Buy Microsoft Before July 29 Q4 Earnings

Thomas Richmond

Sat, July 25, 2026 at 7:41 PM GMT+3 3 min read

Quick Read

• Microsoft trades at a forward P/E of 20, down 25% over the past year, while its AI business hit a $37 billion annual run rate.

• Azure's 40% cloud growth outpaced AWS's 28%, and Microsoft pays shareholders while Amazon offers no dividend and Alphabet yields just 0.54%.

• Microsoft's $627 billion in contracted obligations, with 25% recognized as revenue in the next year, counters the surging capex bear case.

• Act now: the analyst who called NVIDIA in 2010 just named his top 10 AI stocks — and Microsoft didn't make the cut. Grab the names FREE today.

Microsoft (NASDAQ:MSFT) reports fiscal Q4 2026 earnings on July 29, with its stock down 24.69% over the past year, despite accelerating demand across Azure and artificial intelligence.

Azure grew 40% last quarter, Microsoft's AI business reached a $37 billion annual revenue run rate, and commercial remaining performance obligations nearly doubled to $627 billion. Yet shares now trade at $381.70 and approximately 20 times forward earnings.

Three Reasons to Buy Microsoft Ahead of Earnings

First, valuation. MSFT trades at a forward P/E of 20 with a PEG ratio of 1.18, well below where this business has traded for most of the AI cycle. The stock's 52-week high of $551.05 sits far above today's price of $381.70, and the consensus analyst target of $556.75 is backed by 54 buy ratings against zero sells.

Second, income and capital return. Microsoft pays a $3.56 annual dividend and returned $12.7 billion to shareholders in Q2 FY26, up 32% year over year. A debt-to-equity ratio of 0.18 and interest coverage of 53.89x shows Microsoft has a fortress balance sheet. The business also has an excellent 33.28% return on equity.

Third, the growth engine. Azure grew 40% last quarter, the AI business hit a $37 billion annual run rate, up 123% year over year, and commercial remaining performance obligations reached $627 billion, nearly doubling year over year.

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Can a $627 Billion Backlog Justify Microsoft's AI Spending?

The bear case for Microsoft (and hyperscalers at large) is capital intensity. Microsoft spent $30.88 billion on capex last quarter, up 84.39% year over year, and skeptics question the return. The $627 billion RPO shows promise from this spending. Customers have already signed the checks that pay for the buildout, with roughly 25% recognized as revenue in the next 12 months, up 39% year over year.

With commercial backlog nearly doubling, a fortress balance sheet, and Azure growing faster than AWS, Microsoft appears better positioned than most companies to turn its AI investments into decades of earnings and cash-flow growth.

Act now: the analyst who called NVIDIA in 2010 just named his top 10 AI stocks — and Microsoft didn't make the cut. Grab the names FREE today.

Contact editorial@247wallst.com for any questions or corrections.