Moody’s Ratings affirmed Microsoft Corp.’s Aaa senior unsecured issuer rating and senior unsecured ratings on Friday, maintaining a stable outlook.
The rating agency cited the company’s projected revenue growth of 18% to 19% over the next 12 to 24 months, driven by cloud services such as Azure and commercial offerings under Microsoft 365. Moody’s expects revenue to reach approximately $466 billion in the fiscal year ending June 2028.
Operating margins are projected to decline modestly from 47% in fiscal 2026, reflecting lower gross margins in Azure and elevated investments in AI infrastructure and products. Capital expenditures are anticipated to remain in the high-40% range as a percentage of revenue during the same period, nearly four times pre-AI levels.
Moody’s noted that Microsoft’s cumulative free cash flow deficit could total about $4 billion across fiscal 2027 and 2028 due to upfront AI-related spending. As of fiscal year-end 2026, the company held $77 billion in cash and short-term investments, while total debt to EBITDA stood at 0.6x, with Moody’s projecting a trend toward 1x.
The rating agency also highlighted $329 billion in payment obligations related to leases that have not yet commenced. Moody’s indicated that a downgrade could occur if operating profit growth falls short of mid-to-high teens expectations amid sustained high capital intensity, or if cash and short-term investments decline materially while capex remains elevated.
