To The Moon

Intro.

My last post on $Microsoft(MSFT)$ was back in 29 Apr 2026, just before it released its Q3 2026 earnings. click here ! to re-read the post.

Since then, much have happened that caused it stock price of $424.64 per share to consolidate further.

I think it is a timely revisit to see what have transpired between my last post until 08 Jul 2026. Agree ?

The Verdict.

Microsoft did not really break down after 29 Apr 2026; it just kept moving sideways because the market had already priced in a lot of the AI and cloud strength.

Investors then focused on slower parts of the business, higher capex, and the question of how quickly AI spending will turn into even bigger profits.

The pause in the share price reflects a shift in the debate around MSFT.

Earlier, the market rewarded the company for being one of the main winners of the AI cycle.

After the April 2026 earnings report, the debate shifted to execution, monetization, and return on capital.

On the operating side, the actual Q3 2026 print was very strong:

• Revenue rose to $82.9 billion; that’s an +18% YoY increase.

• Net income to $31.8 billion, resulting in a +23% jump for EPS to $4.27 per share.

• Microsoft Cloud revenue to $54.5 billion, a +29% YoY growth.

• Azure and other cloud services grew +40% YoY

• Commercial remaining performance obligation jumped to $627 billion - proof showing that demand is still very strong and MSFT has a very large base of future demand already in the pipeline.

Since 29 Apr 2026.

Despite the strong earnings, MSFT did not break out because investors began to focus more on what comes next.

Clearly, the problem was not weak numbers.

The problem was that investors wanted proof that the growth can keep compounding fast enough to justify the scale of future investment.

Such a setup often leads to consolidation even after a strong quarter, because the stock needs time to absorb the higher expectations.

It is a fact that MSFT and its AI-peers ($Amazon.com(AMZN)$ , $Alphabet(GOOG)$ , META) have been spending heavily to build AI capacity.

Management has pointed to roughly $190 billions of capex in calendar 2026.

The market is asking how fast this spending will turn into higher margins and stronger earnings power.

In other words, the results were good, but the expectations were already very high.

On 01 Jul 2026, $Meta Platforms, Inc.(META)$ reported a plan to rent out excess AI compute, which adds a new layer to that debate.

On the surface, it is a sign that demand for AI infrastructure is broad enough to support another player entering the market.

For MSFT, the more relevant point is that it can make investors more cautious about the economics of AI infrastructure.

This is because if an IT giant like META is willing to resell spare capacity, then the market may start to think more carefully about future supply, pricing, and returns across the cloud space.

That said, META’s action is not a direct blow to MSFT’s business.

Azure is still a much larger, more established platform with deep enterprise ties, and its Q3 numbers still point to a healthy demand backdrop.

META’s move is better viewed as a sentiment headwind than a core earnings threat.

It may have helped keep MSFT in a range, but it definitely did not create the consolidation on its own.

Coming Quarterly Earnings.

For impending Q4 2026, tentatively due on 29 Jul 2026, the base case remains decent rather than spectacular:

• Total revenue is forecasted to come in betweeno $86.7 - $87.8 billion, a +13% to +15% YoY increase. However, it is falling short of consensus of $87.53 billion.

• Azure’s revenue is expected to be between $37.95 - $38.25 billion , a +27% to +28% YoY gain in constant currency - a high bar and consistent with strong enterprise demand.

• Operating margin is expected to decline to 44% (from 46.3%), coming in below analyst expectations.

• Gross margin will narrow to 67.6%, the lowest since 2022, as depreciation costs from data center build-outs mounted.

• With 2026’s projected capex of $190 billion, that is +6% YoY due to soaring memory costs, it is astronomical vs analysts’ estimates of $154.6 billion.

The guidance also showed that MSFT was still working through capacity limits and a huge buildout cycle, so the upside is real, but it is not effortless.

The guidance shows that MSFT is still struggling to build data centres fast enough to meet high demand.

It also means that while business growth is real, to achieve it means massive effort and heavy spending, something that might not sit well with investors.

Coupled with the fact that Q4 guidance is going to come in lower than Wall Street’s consensus does not bode well for MSFT. Agree ?

Probability view

Based on CNBC and Seeking alpha predictions, there’s a:

• 70% chance of a solid Q4.

• 25% chance of a stellar Q4 that clearly re-rates the stock.

• 5% chance of earnings miss or a clearly disappointing guide.

A “stellar” quarter would likely mean:

• MSFT beats the top end of guidance.

• Azure again grows near the top of the range.

• Management gives a confident view that AI demand is still outrunning supply.

The main reason that probability cannot be a ‘high’ percentage, is because market already knows the cloud and AI story is strong, so the bar for a true breakout quarter is now very high.

As noted in the guidance, the bigger question is not whether MSFT can grow, but whether it can grow fast enough to surprise a market that is already expecting a lot.

That is why a solid quarter is more likely than a true blowout quarter.

Proving Phase.

The picture is still constructive, though.

If the corporate backlog keeps converting well and Azure demand stays tight, the stock can eventually break out of consolidation.

But for now, the market is asking for proof, not promises.

MSFT is not in trouble, but it is in a proving phase.

The business is still expanding well, yet the stock needs the next leg of evidence before it can move out of the doldrums with conviction.

Technical Analysis.

At this point in time, I think a technical analysis is ‘necessary’ to determine (a) if MSFT decline is going to persists and (b) how standards have still been maintained despite current headwinds.

As usual, will be looking at MSFT’s (a) Simple Moving Averages (SMA) of 20-day, 50-day & 200-day, (b) MACD and (c) RSI. (see below)

As of 08 Jul 2026

(1) Simple Moving Averages (SMA)..

On Wed, 08 Jul 2026, MSFT ended the day at $383.34 per share, that is higher than its 20-day SMA ($382.08) and lower than its SMA of 50-day ($405.31) and 200-day ($443.59).

The clear stacking of the moving averages SMA (200) > SMA (50) > SMA (20), confirms a structurally bearish alignment over the past year.

Important note:

• On 21 Jan 2026, MSFT formed a “death cross”.

• Since then, the 50-day SMA is still trailing below the 200-day SMA, signaling short-term momentum has deteriorated significantly relative to the broader trend - a shift the market treats as bearish.

(2) MACD.

Both the MACD (-6.82)l and Signal (-9.27) lines are trading well below the zero line.

This positioning indicates that the overarching long-term momentum is firmly negative.

The positive divergence (2.46) indicates that the intense downward velocity especially in recent weeks is exhausting itself.

With macro trend still bearish and a positive Divergence, this implies MSFT is (a) attempting to construct a local price floor or (b) stage a minor relief consolidation around the $383 level, rather than entering a free-fall.

(3) RSI.

The 14-day RSI is “46.53” shows that MSFT is neither over bought nor over sold, it’s in a neutral zone, suggesting that the recent aggressive selling has stabilized into an equilibrium phase, with buyers and sellers pausing to wait for the next fundamental catalyst.

I think for Q4 earnings reporting, MSFT’s key focus should address the doubts ‘head on’ that increased spending can (more!) rapidly translate into (a) Azure growth, (b) AI software revenue and (c) sustainable margins.

What do you think ?

Remember to check out my other posts. (See below). Help to Repost ok, Thanks.

Must Read: Click on below titles to access. Repost to share, Like as encouragement ok. Thanks.

• US Economic reports Before Q2 Earnings starts.

• META going after CRVW and NBIS AI pie ?

• US Market rule by Reports or Q2 Earnings ?

• Do you think MSFT Q4 estimates are going to beat Wall Street’s consensus ?

• Do you think MSFT decline will stop soon, even as US-Iran war seems to be back on, yet again?

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