Microsoft exhibits significant cash flow, potentially elevating MSFT stock by 28% in value
Microsoft Corp. (MSFT) has seen a significant boost in its price target, with analysts estimating it to reach over $668 per share. This upward revision is primarily due to the company's impressive fiscal Q4 2025 earnings results and a positive outlook for the next fiscal year.
The tech giant reported a revenue of $76.4 billion for Q4, marking a 18% year-over-year increase. This growth was accompanied by a 23% increase in operating income and a 24% rise in net income, with diluted earnings per share growing 24% to $3.65.
Microsoft's cloud and AI segments have emerged as key growth drivers. The company's cloud revenue reached $46.7 billion in Q4, a 27% increase, with Azure alone surpassing $75 billion in revenue for the year, growing 34%.
The company's strong performance is also reflected in its cash flow generation. Microsoft generated $42.647 billion in operating cash flow for Q4, a 14.7% increase from the prior year, and improved OCF margins.
Looking ahead, Microsoft has guided for slower capital expenditure growth in the coming year. This, combined with strong operating cash flow margins, is expected to significantly increase free cash flow and FCF margins next fiscal year.
Analysts' increased confidence in Microsoft's future prospects is evident in the 15% rise in the price target from prior estimates. If Microsoft rises to the target price of $668.21, the investor has a potential upside of 33.7%.
For the full year, Microsoft generated $136.16 billion in Operating Cash Flow (OCF) on $281.7 billion in revenue. The estimated Free Cash Flow (FCF) for FY 2026 is $99.68 billion, a 39% year-over-year increase. Assuming Microsoft will generate at least 53% OCF margins next year, the estimated Operating Cash Flow for FY 2026 is $170.68 billion.
The market cap of Microsoft Corp. was $3.88 trillion on the day this article was written. If the company's value rises to over $1 trillion in the next 12 months, as suggested by some analysts, it would represent a +28.5% upside. Using a conservative multiple of 50x, the estimated target market value for Microsoft Corp. is $4,984 billion.
Microsoft's management projects that revenue growth will be in "double digits" for the next fiscal year. Analysts forecast FY 2026 revenue at $322.04 billion, a 14.3% increase.
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In summary, Microsoft's Q4 fiscal 2025 financial strength, marked by accelerating cloud and AI revenues, solid earnings growth, superior cash flow generation, and controlled capex growth, underpin the increased price target to over $668 per share for the next fiscal year.
- With the tech giant's impressive financial performance and robust growth in its cloud and AI segments, investors are now looking at technology-focused businesses as promising avenues for investing in the future.
- Microsoft's strong business strategy, demonstrated by its significant increases in revenue, operating income, and net income, positions it as a key player in the finance industry, making it an attractive choice for those interested in long-term investments.
