Why Microsoft Stock Just Dropped
Microsoft's stock fell 4.6% despite beating earnings expectations with $4.27 per share on sales of $82.9 billion, driven by a 123% year-over-year growth in its artificial intelligence division. The company's heavy investment in cloud and AI infrastructure reduced its free cash flow by 22% to $15.8 billion.
Microsoft's stock dropped 4.6% despite exceeding analyst expectations with earnings of $4.27 per share on sales of $82.9 billion in its fiscal Q3 2026 earnings report. Sales surged 18% year over year, with operating and net profit growing 20% and 23%, respectively. The company's artificial intelligence division saw sales more than double, up 123% year over year to $37 billion. Microsoft generated $46.7 billion in operating cash flow but spent $30.9 billion on capital investment, reducing free cash flow to $15.8 billion, a 22% decline from last year's Q3. The company's year-to-date free cash flow is $47.4 billion, significantly less than its reported $98 billion net profit. Microsoft's valuation is expected to be around 50x free cash flow, considered high despite 23% growth.
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