Microsoft’s Cash Flow Stands Out

This article first appeared on GuruFocus.

Microsoft Corporation (NASDAQ:MSFT) is starting to look like the safest pair of hands in the hyperscaler AI spending race, with BNP Paribas arguing its free cash flow is holding up better than anyone else’s.

In a note to clients, analyst Stefan Slowinski said the Big 5 hyperscalers are now expected to spend nearly $700 billion on capex this year, up roughly 65% y/y and far above what the market was expecting just a few months ago. As that spending wave hits, free cash flow at rivals like Alphabet, Amazon (NASDAQ:AMZN), Meta (NASDAQ:META) and Oracle is sliding toward negative territory. Microsoft, by comparison, still looks steady.

Slowinski expects Microsoft’s free cash flow margins to come in around 22% this year, versus about 5% or less for peers. That discipline could matter more as investors grow nervous about whether AI spending will actually pay off.