4Q26 Recap: Azure and Office Acceleration Create Better Outlook

Research evidence excerpt

4Q26 Recap: Azure and Office Acceleration Create Better Outlook

Equity Research

U.S. Software

30 July 2026

Microsoft Corp.

4Q26 Recap: Azure and Office

Acceleration Create Better Outlook

We see investors revisiting MSFT shares post Q4. The MSFT OVERWEIGHT

company is delivering better Azure and finally better Office Unchanged

growth, while also not surprising negatively on its capex U.S. Software UnchangedPOSITIVE

outlook and FCF targets. Given the different set-up for other Price Target USD 512.00

main players (larger AI investments), we see a positive lowered -6% from USD 545.00

reaction. Price (29-Jul-26) USD 390.54 Potential Upside/Downside +31.1%

Source: Bloomberg, Barclays Research

Expectations were relatively low going into MSFT's Q4 earnings. Some Azure growth

acceleration was expected, but 43% YoY growth in Q4 FY26 and 45% guided growth for Q1 were Market Cap (USD mn) 2899972

much better (Q4 guidance was 39-40%). On top of this, we are also starting to see an Shares Outstanding (mn) 7425.55

acceleration of the M365 Commercial Office with 16% YoY underlying constant currency (cc) Free Float (%) 99.97

growth (vs. 15% in Q3, 14% in Q2). The main driver of growth is now Copilot (was E5 in past), 52 Wk Avg Daily Volume (mn) 30.5

which shows that MSFT is starting to get a second AI growth accelerator, and management Dividend Yield (%) 0.93

guided for a growth acceleration in FY27, partly helped by the new consumption price Return on Equity TTM (%) 34.01

model. Compared to some of the other hyperscalers, MSFT seems to have continued with its Current BVPS (USD) 55.78

disciplined investment approach with CY26 capex unchanged at $190bn ($175bn reported after Source: Bloomberg

the accounting change) and an ongoing commitment to positive FCF for FY27. We think