How Microsoft Stock Is Valued: Its P/E Ratio and Peers

A share price on its own says little about whether a company is cheap or dear. What matters is how much you pay for each dollar the business earns. Then you compare that with what the same company cost in other years and what similar companies cost today.

Getting that answer is harder than it looks. Quote pages show different figures for the same company on the same day. One uses reported profit, another an adjusted figure, and a third the profit analysts expect next year. Big one-off gains and charges can move any of them a long way.

Valuation multiples turn the question into simple sums. The most common one, the price-to-earnings ratio, divides the share price by profit per share, and related ratios do the same with sales, cash flow or growth. Read together, on one date, against the company's own history and its peers, they show what the market is paying for.

Microsoft (MSFT) is a useful company to practice on. It is one of the most valuable listed companies in the world, and its reported profit swings with its stakes in AI firms. You can trade Microsoft's price on BloFin, with leverage and in either direction, through the MSFTUSDT Perpetual, which settles in USDT and tracks Microsoft's share price.

What is Microsoft's P/E ratio?

Microsoft's P/E ratio was 27.7 at the October 28, 2026 close: the closing price of $531.01 divided by $19.16, its diluted earnings per share (EPS) for the four quarters from October 2025 to September 2026. Buyers paid about $28 for each dollar of a year's profit (source: Nasdaq MSFT historical data).

That $19.16 is the reported, or GAAP, figure, and it adds up the diluted EPS Microsoft gave for each of those quarters. The latest is July to September 2026, the first quarter of fiscal 2027, which Microsoft reported after the close on October 28, 2026 (source: Microsoft first-quarter fiscal 2027 results). Those four quarters are the latest twelve months on record, which is why this is called the trailing P/E.

Trailing P/E = share price ÷ diluted EPS over the last four reported quarters.

The earnings yield, EPS divided by price, turns the ratio upside down: $19.16 over the $531.01 close came to 3.6% (source: Nasdaq MSFT historical data). A P/E of 27.7 means each $100 of Microsoft stock stood for about $3.61 of the last year's profit, a figure you can set beside a bond yield or a savings rate. A quote page that has not yet added the new quarter still divides by fiscal 2026's $17.95, which gives 29.6 at the same close (source: Microsoft Form 10-K for fiscal 2026). The result also changes as soon as you swap in a different measure of earnings.

Which earnings go into Microsoft's P/E

Microsoft's trailing P/E ranges from 27.7 to 29.4 depending on which earnings figure you use. Added up from its four quarterly releases, reported EPS is $19.16, including $1.12 a share of net gains on its OpenAI investment, while adjusted EPS, which takes those gains out, is $18.04 (source: Microsoft first-quarter fiscal 2027 results).

Microsoft holds its OpenAI stake as an equity method investment, so gains and losses on it flow into its own profit. Its adjusted figures exclude only those OpenAI items. Almost all of the $1.12 came in the October to December 2025 quarter, when OpenAI gains added $1.02 to EPS (source: Microsoft second-quarter fiscal 2026 results). Microsoft says its fiscal 2026 gains came mainly from a dilution gain when OpenAI recapitalized (source: Microsoft Form 10-K for fiscal 2026). In January to March 2026 the effect was too small to change EPS (source: Microsoft third-quarter fiscal 2026 results).

The July to September 2026 report widened the gap between the two measures. The July to September 2025 quarter that dropped out of the total carried a $0.41 loss from OpenAI, and the quarter that replaced it carried a $0.03 gain (source: Microsoft first-quarter fiscal 2027 results). So trailing reported EPS rose 6.7%, from fiscal 2026's $17.95 to $19.16, while trailing adjusted EPS rose 4.4%, from $17.28 to $18.04. The same swing is why the quarter's reported EPS grew 32% on a year earlier and its adjusted EPS 18%. How Microsoft's earnings reports work shows how the company sets out the two figures side by side.

The April to June 2026 quarter added another layer. Microsoft said discrete items left that quarter's EPS $0.27 higher than its guidance had implied. They included a $3.2 billion gain on its stake in Anthropic and lower costs than expected for its voluntary retirement program. XBOX severance and impairment charges partly offset them. The Anthropic gain sits inside the adjusted figure too, and it stays in the trailing total until the April to June 2027 quarter replaces it (source: Microsoft fourth-quarter fiscal 2026 results).

At the $531.01 close, reported EPS gives a P/E of 27.7 and adjusted EPS gives 29.4. Neither is the "true" P/E. What matters is that you compare like with like. Set a reported P/E for Microsoft against reported figures for other companies, and adjusted against adjusted.

Trailing and forward P/E for Microsoft

Microsoft's forward P/E was 26.9 at the October 28, 2026 close, using the $19.76 a share 52 analysts expected, on average, for the fiscal year from July 2026 to June 2027. That average was last updated on October 27, before the October 28 report, and it is an adjusted (non-GAAP) figure, measured from Microsoft's adjusted $17.28 for fiscal 2026 (source: Stock Analysis MSFT forecast).

A forward P/E prices the company on profit it has not earned yet. For a growing business, that is why it is usually lower than the trailing figure. Against the adjusted $17.28 for fiscal 2026, the $19.76 estimate implies EPS growth of 14.4% (source: Stock Analysis MSFT forecast). One quarter of that year is now on the books at $4.89 adjusted, so the estimate needs $14.87 from the other three, about $4.96 a quarter. Analysts' averages change as they update their models after a report, so treat it as a dated estimate. Pages that quote a different forward P/E for Microsoft are often using a different compiler or the next twelve months in place of the fiscal year.

The two ratios answer different questions. The trailing P/E tells you what you paid for profit already on the books. The forward P/E tells you what you pay if the analysts' average turns out right. The trailing figure moves again with the October to December 2026 quarter, and the forward one moves each time analysts revise their estimates.

Microsoft's P/E from the June low to the October record

Microsoft's trailing P/E rose from 21.0 on June 25, 2026 to 30.3 on October 13, 2026, the day of its record close. Over those dates the share price rose 54.0%, from $352.83 to $543.45 (source: Nasdaq MSFT historical data). Trailing EPS rose only 6.9%, from $16.80 to $17.96, adding up each quarter's EPS as Microsoft first reported it.

Each P/E here uses the earnings Microsoft had reported by that date. On June 25, the latest twelve months ran from April 2025 to March 2026. By October 13, the April to June 2026 quarter had replaced April to June 2025, so the four quarters were fiscal 2026. Their sum is a cent above the $17.95 Microsoft gives for the full year (source: Microsoft Form 10-K for fiscal 2026), because each quarter's EPS is rounded to the cent on its own before the four are added.

That split is the whole story of the rally in valuation terms: about 7% came from higher earnings and the rest from investors paying more for each dollar of them. Multiply the two and you get the price move, since 1.069 times 1.441 is about 1.54. The multiple itself rose 44.1% (source: Nasdaq MSFT historical data).

The June reading also stands out on a longer view. At 21.0, Microsoft's trailing P/E on June 25, 2026 was the lowest of any trading day in the ten years to October 28, 2026, on earnings as reported at the time. Because the MSFTUSDT Perpetual tracks Microsoft's share price, a re-rating this size moves the contract by about the same percentage. You can follow it on the MSFTUSDT Perpetual page.

Microsoft's P/E over the past 10 years

Microsoft's trailing P/E had a median of 33.1 over the 2,513 trading days from October 28, 2016 to October 28, 2026, using each quarter's EPS as Microsoft first reported it. At 27.7 on October 28, 2026, the stock sat cheaper than on 80.8% of those days (source: Nasdaq MSFT historical data).

The 2018 figures are a warning about reported earnings. In the October to December 2017 quarter, Microsoft booked a net charge of $13.8 billion for the US tax law passed that December. It turned the quarter into a loss of $0.82 a share (source: Microsoft second-quarter fiscal 2018 results). That loss sat inside trailing EPS for a full year and pushed the P/E as high as 66.3 on March 12, 2018, while the business itself was growing. Microsoft adopted a new revenue accounting standard in fiscal 2018 and restated fiscal 2017, lifting that year's diluted EPS from $2.71 to $3.25. Quote pages built on restated figures show lower 2017 and 2018 readings (source: Microsoft 2018 annual report). The same loss explains 2019's high of 44.7, on January 18, before the quarter dropped out of the total. Leave those twelve months aside and the highest reading of the decade was 40.5 on July 5, 2024.

Read the other nine years as a band. In most years the median sat between about 28 and 37, and the lows came in sell-offs such as late 2022 and mid-2026. The price side of each of those moves is set out in Microsoft stock price history, cycle by cycle. A P/E under its ten-year median says the stock is cheaper than usual relative to its own past profit. That is different from saying it is cheap, because earnings growth, interest rates and the market's mood have all changed over the decade.

Microsoft against the S&P 500 and tech peers

Microsoft's trailing P/E of 27.7 at the October 28, 2026 close was 7.8% above the S&P 500's 25.7 in FactSet's October 23 figures, and its forward P/E of 26.9 was 43.7% above the index's 18.7. FactSet's forward measure uses the next twelve months, against Microsoft's fiscal year, so the second gap is approximate (source: FactSet Earnings Insight, October 23, 2026).

FactSet put the index's forward P/E under both its five-year average of 19.8 and its ten-year average of 19.1. So the whole market was not especially dear on that measure, and Microsoft's premium was its own. The fairer test is against companies that sell similar things, using one method on one date.

Every figure uses the October 28, 2026 close. Trailing EPS covers each company's last four reported quarters, taken from its reports to the US Securities and Exchange Commission and, for Alphabet, from its October 28 release. Microsoft, Alphabet and ServiceNow all reported after that close, so their totals include the July to September 2026 quarter. Forward figures use the analyst average for each company's fiscal year in progress at the October 28 close, from its Stock Analysis forecast page, such as Microsoft's (source: Stock Analysis MSFT forecast). For Apple, that is the year to September 2027, which the site labels "next year". Microsoft's, Alphabet's and ServiceNow's averages all predate those reports. The middle of the nine peers was 22.2 trailing and 23.1 forward, so Microsoft traded at a premium on both.

Two of those trailing figures are low because of gains outside the core business. Alphabet's April to June 2026 quarter included a $99.0 billion gain on shares it holds in other companies, which added $6.26 to its EPS (source: Alphabet second-quarter 2026 results). A loss on those shares then took $0.55 off its July to September EPS (source: Alphabet third-quarter 2026 results). Without both, Alphabet's trailing P/E works out at 24.2. Amazon's April to June quarter included $53.4 billion of pre-tax other income, mostly from its investments in Anthropic (source: Amazon second-quarter 2026 results). That is why their forward P/Es, built on adjusted estimates, sit well over their trailing ones.

The software names show a different pattern. Salesforce, Adobe and Oracle traded at forward P/Es of 10.2 to 17.8 at the same close, after a sell-off reported in January 2026 under the label "AI eats software". It was driven by fears that AI agents would cut demand for software sold per user (source: heise). The same report counted Microsoft among the stocks falling while the wider market traded near its highs. Apple, Amazon, Alphabet, Meta, Nvidia, Oracle, Adobe and ServiceNow also trade on BloFin as USDT-settled perpetuals, as Microsoft does.

Microsoft's margins and the premium

Microsoft earned an operating margin of 46.8% in fiscal 2026, which means $46.80 of operating profit from every $100 of sales. That was up from 44.6% two years earlier. Margins this high are the usual reason a company earns a higher multiple than the market (source: Microsoft Form 10-K for fiscal 2026).

Follow $100 of fiscal 2026 revenue down the income statement. About $67.90 was left after the direct cost of making and running its products. $46.80 was left after research, sales and office costs, and $40.30 after interest, investment gains and tax, all from the annual report's totals. Five years earlier, in fiscal 2021, the operating margin was 41.6% (source: Microsoft Form 10-K for fiscal 2021).

The cloud business points the other way. Microsoft Cloud's gross margin percentage decreased to 66% in fiscal 2026. The company put that down to its spending on AI data centers and growing use of its AI products (source: Microsoft Form 10-K for fiscal 2026). High margins justify a high multiple only while they hold, so the cloud gross margin is a line worth reading early in each report.

Free cash flow and enterprise value

Microsoft's enterprise value was about $3.9 trillion at the October 28, 2026 close (source: Microsoft Form 10-Q for the quarter ended September 30, 2026), and its free cash flow over the twelve months to September 2026 was $60.0 billion, an EV-to-free-cash-flow multiple of 65.3. That is far higher than its P/E, because $135.9 billion of spending on property and equipment took most of the $195.9 billion that operations brought in (source: Microsoft first-quarter fiscal 2027 results).

Enterprise value (EV) is what you would pay for the whole company, debt included, minus the cash it holds. At the October 28 close, the 7,426,194,552 Microsoft shares outstanding on October 22 were worth about $3.9 trillion (source: Microsoft Form 10-Q for the quarter ended September 30, 2026). Free cash flow (FCF) is the cash left after the business pays for its new equipment and buildings. The twelve-month figure adds the latest quarter to fiscal 2026 (source: Microsoft Form 10-K for fiscal 2026) and takes out the same quarter a year earlier (source: Microsoft first-quarter fiscal 2027 results).

EV = market value + debt − cash and short-term investments; FCF = cash from operations − additions to property and equipment.

Microsoft's cash spending on property and equipment more than doubled in the July to September 2026 quarter, to $39.4 billion, while cash from operations rose 28.7% to $58.0 billion. So the quarter's free cash flow fell to $18.6 billion, from $25.7 billion a year earlier (source: Microsoft first-quarter fiscal 2027 results). Microsoft also leases data centers, and adding its $71.0 billion of finance lease liabilities at September 30 lifts EV/FCF to 66.5 (source: Microsoft Form 10-Q for the quarter ended September 30, 2026). Deferred income taxes added $16.3 billion to operating cash flow over the twelve months. Without that add-back, EV/FCF works out at 89.7, and Microsoft's AI capex and cash flow covers the spending and the tax rules behind both lines.

The balance sheet is the other half of enterprise value. Microsoft's cash and short-term investments exceeded its long-term debt by $29.0 billion at September 30, 2026, which is why its EV sits just under its market value (source: Microsoft first-quarter fiscal 2027 results). S&P and Moody's both give it their top credit rating (source: Microsoft investor FAQ).

Stock-based compensation and Microsoft's share count

Microsoft recorded $12.6 billion of stock-based compensation in the twelve months to September 2026, equal to 3.6% of revenue. The cost is real but uses no cash, so it is added back in cash from operations. Taking it out of free cash flow leaves $47.4 billion and raises EV/FCF from 65.3 to 82.6 (source: Microsoft first-quarter fiscal 2027 results).

Shares paid to staff add to the share count unless the company buys back at least as many. In fiscal 2026 Microsoft spent $22.3 billion on buybacks, about 1.8 times its stock-based compensation, and paid $26.4 billion in dividends (source: Microsoft Form 10-K for fiscal 2026). The diluted share count includes shares staff can still receive. It fell from 7,608 million in fiscal 2021 (source: Microsoft Form 10-K for fiscal 2021) to 7,453 million in fiscal 2026, a drop of 2.0% (source: Microsoft Form 10-K for fiscal 2026).

That slow fall matters for every per-share ratio. EPS grows a little faster than net income when the share count shrinks, so part of Microsoft's EPS growth comes from buybacks. Microsoft's dividend and buyback record sets out how the company returns cash and how much it has spent over the years.

Microsoft's PEG ratio

Microsoft's PEG ratio was about 1.6 on trailing figures at the October 28, 2026 close. The PEG divides the P/E by the yearly EPS growth rate. Reported EPS grew from $8.05 in fiscal 2021 (source: Microsoft Form 10-K for fiscal 2021) to $17.95 in fiscal 2026 (source: Microsoft Form 10-K for fiscal 2026). That is an average of 17.4% a year, so 27.7 divided by 17.4 gives 1.59.

A PEG near 1 is often read as a P/E in line with growth, and a higher one as paying up for each point of growth. On forward figures, the 26.9 forward P/E divided by the 14.4% growth in the analysts' fiscal 2027 estimate gives about 1.87 (source: Stock Analysis MSFT forecast). The forward PEG is higher because the analysts' average expects slower growth than the last five years delivered.

The trailing PEG flatters Microsoft a little, because both of its inputs include OpenAI gains. The P/E uses the last four quarters, with $1.12 a share of them, and the growth rate ends in fiscal 2026, with $0.67. Adjusted EPS grew from $7.97 in fiscal 2021, a figure that excludes a one-off tax benefit (source: Microsoft Form 10-K for fiscal 2021), to $17.28 in fiscal 2026, or 16.7% a year (source: Microsoft fourth-quarter fiscal 2026 results). With an adjusted P/E of 29.4, the PEG is about 1.76. Like the P/E, it is a ratio built from one estimate and one choice of years, and it moves when either changes.

Reading Microsoft's valuation as a trader

At the October 28, 2026 close, Microsoft traded at 27.7 times reported earnings for the last four quarters and 26.9 times the analysts' estimate for this fiscal year. That is a premium to the S&P 500 and most big tech peers, but under its own ten-year median P/E of 33.1. Its EV/FCF of 65.3 reflects heavy AI spending.

None of these numbers answers whether the stock is overvalued on its own. A P/E is high or low only against a growth rate, a peer or a past, and each comparison carries its own choice of earnings and date. The case for and against owning the stock, with these inputs in it, is laid out in the bull and bear case for Microsoft stock.

Traders use the same figures in a narrower way. A stock priced near the top of its usual range has more room to fall if growth slows, and one near the bottom has less. So the multiple can help you size a trade and pick a side. If your reading is that the price runs ahead of profit, shorting Microsoft on BloFin explains how a short position on the perpetual works and what it costs.

Looking to trade Microsoft around its valuation? To get started, you'll need to first create a BloFin account, fund your account with cryptocurrency, and go to the MSFTUSDT Perpetual trading page.

Frequently asked questions

What is Microsoft's price-to-sales ratio?

Microsoft's price-to-sales ratio was 11.4 at the October 28, 2026 close: a market value of about $3.9 trillion against revenue of $346.4 billion in the twelve months to September 2026 (source: Microsoft first-quarter fiscal 2027 results). On enterprise value the ratio is 11.3, slightly lower because Microsoft holds more cash than debt. Sales ratios are useful when profit is distorted by one-off gains, since revenue carries no investment gains.

What credit rating does Microsoft have?

Microsoft's corporate credit rating is AAA from S&P and Aaa from Moody's, the highest grade each gives. Its short-term debt, called commercial paper, is rated A-1+ and P-1, their top short-term grades (source: Microsoft investor FAQ). A top rating lowers what Microsoft pays to borrow, and it is part of why investors treat its earnings as low-risk when they choose a multiple.

How does Microsoft's earnings yield compare with its dividend yield?

At the October 28, 2026 close, Microsoft's earnings yield was 3.6% and its dividend yield 0.7%, based on the current quarterly dividend of $0.98 a share, or $3.92 a year (source: Microsoft investor FAQ). That annual dividend is 20.5% of reported EPS for the last four quarters, so Microsoft pays out about a fifth of its profit as dividends and keeps the rest for investment and buybacks.

Does the MSFTUSDT Perpetual have a P/E ratio?

The MSFTUSDT Perpetual has no earnings of its own, so it has no P/E. Its price is based on a basket of tokenized Microsoft stock prices already trading in the market, so it carries the share's multiple. Holding the contract gives no dividends or voting rights (source: BloFin stock futures notice). How the MSFTUSDT Perpetual works covers its contract terms.

When does Microsoft's P/E ratio change next?

Microsoft's trailing P/E changes with every move in the share price, and its earnings side changes when Microsoft reports the October to December 2026 quarter, the second of fiscal 2027. Microsoft reported the same quarter a year earlier on January 28, 2026, and its investor FAQ gives the next date once it is set. The new quarter's EPS replaces the $5.16 from October to December 2025, which included $1.02 a share of OpenAI gains (source: Microsoft second-quarter fiscal 2026 results).

Researched and written by the BloFin Academy editorial team with AI-assisted drafting. All facts independently verified. Primary sources include Microsoft's quarterly and annual filings with the US Securities and Exchange Commission, its annual reports for fiscal 2018, fiscal 2021 and fiscal 2026, its Form 10-Q for the quarter ended September 30, 2026, its results for the second quarter of fiscal 2018, the second, third and fourth quarters of fiscal 2026 and the first quarter of fiscal 2027, and its investor FAQ. Other sources are Alphabet's second- and third-quarter 2026 results, Amazon's second-quarter 2026 results, FactSet's Earnings Insight of October 23, 2026, analyst averages compiled by Stock Analysis, Nasdaq daily price history, reporting from heise and BloFin's stock futures notice, current as of October 29, 2026.

Nothing in this article constitutes financial advice, and nothing in it is a recommendation to buy, sell or hold Microsoft in any form. Multiples change with every price move and every report. A P/E that looked low in June 2026 rose by almost half in under four months while earnings barely moved, and the same can happen in reverse. A leveraged MSFTUSDT Perpetual position can be liquidated by a move like that long before a view on value plays out. Funding payments also run against or for it while you wait. Past performance does not indicate future results. Do your own research and consider your risk tolerance before you trade on BloFin.