Key Takeaways
- Apple expects its gross margin to fall to 45%-46% this quarter, from 47.9%, as memory chip costs rise. Microsoft expects about $170 billion of capex in calendar 2026.
- Apple’s dividend takes 12% of its free cash flow over the trailing 12 months, and Microsoft’s takes 45%.
- Microsoft’s capex rose from $24 billion in fiscal 2022 to $116 billion in fiscal 2026, faster than its cash from operations.
- What to watch: whether Microsoft’s free cash flow keeps up with its dividend as its AI spending climbs.
Apple (AAPL) just told investors its gross margin will slip to 45%-46% in the December quarter as memory chip prices climb. That’s down from the 47.9% it reported for the quarter ended Sept. 26.
Microsoft (MSFT) has a rising bill of its own: it expects to spend about $170 billion on capex in calendar 2026 as it builds out its AI capacity. Both companies pay their dividends from free cash flow. So for anyone holding either one for a growing check, the question is which dividend grows faster over the next decade.
| Metric | Apple (AAPL) | Microsoft (MSFT) |
|---|---|---|
| Dividend yield | 0.3% | 0.7% |
| Annual dividend | $1.08 | $3.92 |
| 5-year dividend growth | 5.0% a year (fiscal 2020-2025) | 10.2% a year (fiscal 2021-2026) |
| 10-year dividend growth | 7.6% a year (fiscal 2015-2025) | 9.7% a year (fiscal 2016-2026) |
| Cash dividend payout ratio (TTM) | 12% | 45% |
| Net debt/EBITDA | -0.2x | 0.3x |
| Interest coverage | 41.2x | 50.2x |
Source: TIKR, Nov. 9, 2026. TTM is the 12 months to Sept. 26, 2026 for Apple and to Sept. 30, 2026 for Microsoft.
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Apple could afford much bigger raises
Revenue rose 15% to $478.8 billion in fiscal 2026 (the year to September). In the September quarter, iPhone grew 17%, Mac grew 24%, and Services grew 10% to a record $31.6 billion.
Apple’s free cash flow climbed from $51.8 billion in fiscal 2017 to $136 billion in fiscal 2026, while its dividends paid rose from $12.8 billion to $15.7 billion:
That’s a tiny 12% cash dividend payout ratio over the trailing 12 months, and the ratio hasn’t topped 15.6% in any fiscal year since 2021. CFO Kevan Parekh said on the latest call that Apple will “invest in our business and return excess cash to shareholders.” On Nov. 2, Apple held the dividend at $0.27 a share a quarter, the rate it set in April.
The main risk is the margin. CEO John Ternus called memory pricing “unprecedented,” and the December quarter’s margin guidance reflects it.
Microsoft’s raises run into its AI bill
Where Apple’s rising costs hit its margin, Microsoft’s hit its cash flow. Microsoft’s business is growing faster: revenue rose 19% to $92.3 billion in the quarter ended Sept. 30, Azure grew 48%, and commercial remaining performance obligation jumped 73% to $677 billion.
Microsoft’s dividends paid more than doubled, from $11.9 billion in fiscal 2017 (years to June) to $26.5 billion in fiscal 2026. Its free cash flow peaked at $74.1 billion in fiscal 2024 and fell to $67.0 billion in fiscal 2026:
That pushed its cash dividend payout ratio from 29.4% in fiscal 2021 to 39.5% in fiscal 2026, and to 45% over the trailing 12 months. That’s still well-covered.
So which dividend wins?
Microsoft’s dividend grows faster, and it’s the one I’d want paying me for the next 10 years. Put $10,000 in each stock today, and at their 5-year rates Microsoft pays about $1,126 over the decade, against about $377 for Apple. Microsoft’s year-10 check of about $168 works out to a 1.7% yield on the original $10,000. Apple’s works out to 0.5%.
Microsoft’s capex rose from $23.9 billion in fiscal 2022 to $116 billion in fiscal 2026. Over the same years, its cash from operations roughly doubled, from $89.0 billion to $183 billion:
Microsoft’s guidance of about $170 billion for calendar 2026 comes close to all the cash its operations brought in during fiscal 2026. Its September-quarter capital spending came in at $45.2 billion, below the roughly $50.7 billion analysts expected, because third-party capacity arrived late. My read: some of that bill moves into later quarters. Microsoft’s own target is to stay free cash flow positive in fiscal 2027, a low bar for a dividend that cost $27.0 billion over the past 12 months.
Apple’s dividend has far more room. Its 12% payout and its net cash could fund much faster raises. But Apple hasn’t chosen to use that room. Even if Microsoft’s raises slowed to Apple’s 5.0% pace, Microsoft’s $70 starting check on $10,000 is more than twice Apple’s $30, so it would still pay more every year.
If Microsoft’s capex keeps outrunning its cash from operations beyond this year, its raises could slow. Its next one will show how much room management thinks it has.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
