JPMorgan forecasts a decline in Microsoft Cloud’s ROIC from 54% in FY24 to approximately 37% in FY26, followed by stabilization around 32%-33% from FY27 through FY31. Microsoft Cloud generated $214 billion in revenue in FY26, a 27% year-over-year increase, while Azure revenue jumped 41% last quarter. The company expects to spend over $50 billion in capex in Q1 FY27 and aims to double its data-center capacity by the end of FY27 compared to FY25. This ramp-up in AI infrastructure spending is pressuring margins and free cash flow in the near term, though the 32%-33% ROIC range would remain above the mid-20s industry convergence expected by 2030.
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