Why Is Everyone Talking About Microsoft Stock? | MSFT STock Deep Dive Part 2

Parkev Tatevosian, CFA•Aug 9, 2026

Summary

Parkev provides a deep dive into Microsoft's financial performance, highlighting a robust $331 billion in annual revenue with an 18% growth rate. Parkev emphasizes that the company's operating income grew even faster at 21%, leading to an operating profit margin of approximately 45% in the most recent quarter. This profitability is attributed to a 'productivity boom' where Microsoft is achieving more with a 2% reduction in headcount, a trend Parkev notes is common among tech giants investing heavily in artificial intelligence.

Parkev breaks down Microsoft's $41 billion capital expenditure, noting that two-thirds of this spending is allocated to short-lived assets like CPUs and GPUs, while one-third goes toward long-term infrastructure. Despite these massive investments, Microsoft generated $19.6 billion in free cash flow, outperforming peers like Amazon and Meta. However, Parkev warns about the company's $678 billion in remaining performance obligations (RPO), noting that a significant portion is tied to OpenAI, which currently faces a concerning financial situation.

MSFT (Microsoft): Parkev highlights Microsoft's exceptional ability to maintain high margins and lead in free cash flow generation despite heavy AI spending. Parkev notes that customer demand for AI services continues to exceed available capacity, providing a clear path for revenue growth as more data centers come online. However, Parkev points out the risk associated with its massive RPO, much of which is linked to the financially unstable OpenAI.

AAPL (Apple): Parkev observes that Apple is currently 'sitting out' the expensive AI infrastructure race, choosing to wait and potentially license technology later. While the market is currently rewarding this conservative approach, Parkev suggests this strategy might backfire if AI proves to be a critical technology that required early internal investment. Parkev contrasts Apple's lack of heavy AI R&D spending with the aggressive strategies of other hyperscalers.

Mentioned Stocks

MSFT

Sentiment: BUYAction: RECOMMENDED

Reasoning: Parkev is very positive about Microsoft's ability to maintain a 45% operating margin while growing revenue at 18%. Parkev highlights that Microsoft generates $19.6 billion in free cash flow, which is the highest among large-cap hyperscalers. Parkev also notes that demand for Microsoft's AI capacity continues to exceed its supply, suggesting strong future growth as capacity scales.

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AAPL

Sentiment: HOLD

Reasoning: Parkev notes that Apple is currently sitting out the AI infrastructure race and avoiding the massive capital expenditures seen at Microsoft or Meta. While Parkev mentions the market is rewarding this strategy for now, Parkev warns it could backfire if AI becomes a critical technology Apple failed to invest in early. Parkev views Apple's strategy as a 'wait and watch' approach rather than an active leadership position in the current AI trend.

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