MSFT
MSFT
Accumulate 2026-04-12
Model
DCF
Price at Report
$370.87
Base IV
$428.17
Bear IV
$215.60
Bull IV
$712.03
Entry Zone: 205-394 · Sell Above: 605
Bore Family Office
Valuation Report — Microsoft Corporation (MSFT) • April 12, 2026
Unlevered DCF (FCFF @ WACC) • Discount Rate: 9.50% • Current Price: $370.87
Prepared by Lurch • Bore Family Office • Data: Finnhub, StockAnalysis.com, S&P Global Market Intelligence
🏢 Business Overview
Microsoft Corporation (MSFT) is a global technology leader founded in 1975, renowned for its Windows operating system, Microsoft 365 productivity suite, Azure cloud platform, and AI-driven Copilot ecosystem. The company operates through three segments: Intelligent Cloud, Productivity & Business Processes, and More Personal Computing.
In FY2025, Microsoft delivered record performance with revenue of $281.7B and operating income of $133.3B. Azure remains the primary growth engine with 30%+ constant-currency growth, while AI services contributed an increasing share of cloud revenue. The Activision Blizzard acquisition expanded the gaming segment significantly.
| Business Segment | Revenue | % of Total | YoY Growth | Margin | Notes |
|---|---|---|---|---|---|
| Intelligent Cloud | $96,800M | 34% | +21.0% | — | Azure + server products + enterprise services |
| Productivity & Business Processes | $84,700M | 30% | +12.0% | — | Office 365, LinkedIn, Dynamics |
| More Personal Computing | $69,600M | 25% | +8.0% | — | Windows, Devices, Gaming (incl. Activision) |
| Other / Corporate | $30,600M | 11% | +5.0% | — | Corporate-level adjustments |
| Blended Growth Rate | — | 100% | +13.3% | — | Weighted avg across segments |
🔍 Quality Scorecard
| Metric | Value | Assessment |
|---|---|---|
| ROIC | 28.0% | ≥12% strong |
| FCF Margin | 27.0% | ≥10% strong |
| Debt / EBITDA | 0.5x | ≤2x conservative |
| Revenue Trend | Growing 3yr | 3-year directional trend |
| FCF Margin Trend | Expanding | Directional margin trajectory |
| Analyst Revisions | Upward revisions | Last 90 days consensus direction |
✅ Quality profile supports the valuation
📊 Financial Snapshot
| Metric | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Revenue ($M) | $168,088 | $198,270 | $211,915 | $245,122 | $281,700 |
| Rev YoY Growth | — | +18.0% | +6.9% | +15.7% | +14.9% |
| Gross Margin | 68.9% | 69.0% | 69.7% | 69.9% | 69.6% |
| EBITDA ($M) | $82,500 | $98,200 | $108,700 | $126,800 | $145,600 |
| EBITDA Margin | 49.1% | 49.5% | 51.3% | 51.7% | 51.7% |
| Operating Income ($M) | $69,900 | $83,300 | $92,600 | $109,400 | $133,300 |
| Operating Margin | 41.6% | 42.0% | 43.7% | 44.6% | 47.3% |
| Net Income ($M) | $61,300 | $72,700 | $72,400 | $88,100 | $106,000 |
| Net Margin | 36.5% | 36.7% | 34.2% | 35.9% | 37.6% |
| EPS (diluted) | $8.05 | $9.70 | $9.68 | $11.80 | $14.25 |
| Free Cash Flow ($M) | $60,700 | $65,100 | $59,300 | $73,600 | $77,000 |
| Annual DPS | $2.480 | $2.860 | $3.000 | $3.320 | $3.800 |
| Total Debt ($M) | $67,000 | $49,700 | $49,000 | $47,000 | $45,000 |
📈 DCF Scenarios
$216
🔴 Bear
$428
📊 Base
$712
🚀 Bull
$370.87
Current Price
$510
Analyst Avg PT
| Scenario | Stage 1 (Yrs 1–5) | Stage 2 (Yrs 6–10) | Terminal g | WACC | Intrinsic Value | vs Price |
|---|---|---|---|---|---|---|
| 🔴 Bear | 15.0% | 8.0% | 2.5% | 10.00% | $216 | ▼41.9% |
| 📊 Base | 22.0% | 15.0% | 3.5% | 9.50% | $428 | ▲15.4% |
| 🚀 Bull | 28.0% | 18.0% | 4.0% | 9.00% | $712 | ▲92.0% |
📋 Full 10-Year Projection Tables
Bear Scenario
Stage 1: 15.0% | Stage 2: 8.0% | Terminal: 2.5%
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|---|---|---|---|
| Year 1 ✦ | Stage 1 | $77.00B | $70.00B | $70.00B |
| Year 2 ✦ | Stage 1 | $88.00B | $72.73B | $142.73B |
| Year 3 ✦ | Stage 1 | $100.00B | $75.13B | $217.86B |
| Year 4 ✦ | Stage 1 | $111.00B | $75.81B | $293.67B |
| Year 5 ✦ | Stage 1 | $120.00B | $74.51B | $368.18B |
| Year 6 | Stage 2 | $129.60B | $73.16B | $441.34B |
| Year 7 | Stage 2 | $139.97B | $71.83B | $513.17B |
| Year 8 | Stage 2 | $151.17B | $70.52B | $583.69B |
| Year 9 | Stage 2 | $163.26B | $69.24B | $652.92B |
| Year 10 | Stage 2 | $176.32B | $67.98B | $720.90B |
| Terminal | — | TV=$2409.7B | PV(TV)=$929.0B (56% of EV) | EV=$1649.9B |
| Intrinsic Value | — | — | EV $1649.9B − Net Debt → Equity / Shares | $216 |
How the price per share is derived: Each year's projected free cash flow is discounted back at WACC (10.00%) to get its present value. After Year 10, FCF grows at the terminal rate (2.5%) in perpetuity — the Gordon Growth formula gives a terminal value of FCF11 / (WACC − gT) = $2409.7B. That terminal value is discounted back 10 years to today's dollars (PV of TV = $929.0B). Enterprise Value = PV of FCFs ($720.9B) + PV of TV ($929.0B) = $1649.9B. Subtracting net debt gives equity value of $1601.9B, divided by shares outstanding = $216 per share.
Base Scenario
Stage 1: 22.0% | Stage 2: 15.0% | Terminal: 3.5%
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|---|---|---|---|
| Year 1 ✦ | Stage 1 | $77.00B | $70.32B | $70.32B |
| Year 2 ✦ | Stage 1 | $97.00B | $80.90B | $151.22B |
| Year 3 ✦ | Stage 1 | $116.00B | $88.35B | $239.57B |
| Year 4 ✦ | Stage 1 | $136.00B | $94.60B | $334.17B |
| Year 5 ✦ | Stage 1 | $158.00B | $100.37B | $434.53B |
| Year 6 | Stage 2 | $181.70B | $105.41B | $539.94B |
| Year 7 | Stage 2 | $208.95B | $110.70B | $650.64B |
| Year 8 | Stage 2 | $240.30B | $116.26B | $766.91B |
| Year 9 | Stage 2 | $276.34B | $122.10B | $889.01B |
| Year 10 | Stage 2 | $317.79B | $128.23B | $1017.24B |
| Terminal | — | TV=$5482.0B | PV(TV)=$2212.0B (68% of EV) | EV=$3229.3B |
| Intrinsic Value | — | — | EV $3229.3B − Net Debt → Equity / Shares | $428 |
How the price per share is derived: Each year's projected free cash flow is discounted back at WACC (9.50%) to get its present value. After Year 10, FCF grows at the terminal rate (3.5%) in perpetuity — the Gordon Growth formula gives a terminal value of FCF11 / (WACC − gT) = $5482.0B. That terminal value is discounted back 10 years to today's dollars (PV of TV = $2212.0B). Enterprise Value = PV of FCFs ($1017.2B) + PV of TV ($2212.0B) = $3229.3B. Subtracting net debt gives equity value of $3181.3B, divided by shares outstanding = $428 per share.
✦ Year-by-year analyst consensus FCF estimates (Base scenario)
Bull Scenario
Stage 1: 28.0% | Stage 2: 18.0% | Terminal: 4.0%
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|---|---|---|---|
| Year 1 ✦ | Stage 1 | $77.00B | $70.64B | $70.64B |
| Year 2 ✦ | Stage 1 | $108.00B | $90.90B | $161.54B |
| Year 3 ✦ | Stage 1 | $135.00B | $104.24B | $265.79B |
| Year 4 ✦ | Stage 1 | $166.00B | $117.60B | $383.39B |
| Year 5 ✦ | Stage 1 | $199.00B | $129.34B | $512.72B |
| Year 6 | Stage 2 | $234.82B | $140.02B | $652.74B |
| Year 7 | Stage 2 | $277.09B | $151.58B | $804.32B |
| Year 8 | Stage 2 | $326.96B | $164.09B | $968.41B |
| Year 9 | Stage 2 | $385.82B | $177.64B | $1146.05B |
| Year 10 | Stage 2 | $455.26B | $192.31B | $1338.36B |
| Terminal | — | TV=$9469.5B | PV(TV)=$4000.0B (75% of EV) | EV=$5338.4B |
| Intrinsic Value | — | — | EV $5338.4B − Net Debt → Equity / Shares | $712 |
How the price per share is derived: Each year's projected free cash flow is discounted back at WACC (9.00%) to get its present value. After Year 10, FCF grows at the terminal rate (4.0%) in perpetuity — the Gordon Growth formula gives a terminal value of FCF11 / (WACC − gT) = $9469.5B. That terminal value is discounted back 10 years to today's dollars (PV of TV = $4000.0B). Enterprise Value = PV of FCFs ($1338.4B) + PV of TV ($4000.0B) = $5338.4B. Subtracting net debt gives equity value of $5290.4B, divided by shares outstanding = $712 per share.
🔲 Sensitivity Table
| WACC \ gT | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 7.5% | $653 | $697 | $751 | $816 | $898 |
| 8.0% | $592 | $628 | $671 | $722 | $785 |
| 8.5% | $541 | $570 | $605 | $646 | $695 |
| 9.0% | $496 | $521 | $550 | $583 | $622 |
| 9.5% | $458 | $479 | $502 | $530 | $561 |
| 10.0% | $424 | $441 | $461 | $484 | $510 |
| 10.5% | $394 | $409 | $426 | $445 | $467 |
| 11.0% | $367 | $380 | $395 | $411 | $429 |
| 11.5% | $344 | $355 | $367 | $381 | $397 |
Green = >10% above current price. Red = >10% below. Gold = within ±10%.
📉 Long-Term Price Trend Channel
Log-linear trend fitted to full price history. ±1.5σ bands. Green shaded zone = bottom 25% of historical range — historically attractive entry.
🏦 Comparable Valuation
| Company | Ticker | P/E | EV/EBITDA | P/FCF | Div Yield | Notes |
|---|---|---|---|---|---|---|
| Apple | AAPL | 34x | 28x | 30x | 0.5% | Services transition; lower growth |
| Amazon | AMZN | 58x | 32x | 42x | — | AWS competitor; retail drag |
| GOOG | 24x | 18x | 22x | 0.5% | Search monopoly; AI integration | |
| Salesforce | CRM | 28x | 22x | 25x | 0.5% | Enterprise SaaS pure-play |
| MSFT Own History | MSFT | 35x | 26x | 28x | 0.7% | 5-year average |
🔮 Analyst Forecast Section
(a) EPS Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2022 | $9.70 | — | — | — | Actual |
| 2023 | $9.68 | — | — | — | Actual |
| 2024 | $11.80 | — | — | — | Actual |
| 2025 | $14.25 | — | — | — | Actual |
| 2026 | $13.50 | $14.80 | $16.00 | 45 | Estimate |
| 2027 | $15.50 | $17.20 | $19.00 | 40 | Estimate |
(b) Revenue Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2022 | $198.3B | — | — | — | Actual |
| 2023 | $211.9B | — | — | — | Actual |
| 2024 | $245.1B | — | — | — | Actual |
| 2025 | $281.7B | — | — | — | Actual |
| 2026 | $285.0B | $305.0B | $320.0B | 45 | Estimate |
| 2027 | $310.0B | $345.0B | $370.0B | 40 | Estimate |
(c) Individual Analyst Price Targets
| Analyst | Firm | Rating | PT | Upside |
|---|---|---|---|---|
| Brent Thill | Jefferies | Buy | $550 | +48.3% |
| Mark Moerdler | Bernstein | Outperform | $540 | +45.6% |
| Kirk Materne | Evercore ISI | Outperform | $530 | +42.9% |
| Brad Reback | Stifel | Buy | $525 | +41.6% |
| Karl Keirstead | UBS | Buy | $520 | +40.2% |
| John DiFucci | Guggenheim | Neutral | $440 | +18.6% |
💡 Investment Thesis
- AI Monetization Leader: Copilot and Azure AI are generating real revenue — not just hype. Enterprise Copilot adoption is accelerating with 70% of Fortune 500 companies piloting.
- Azure Cloud Momentum: 30%+ growth with increasing AI workload mix. Azure has solidified #2 cloud position and continues gaining share vs AWS.
- FCF Machine: $77B+ in annual FCF with 27%+ margins. Massive share buyback capacity supports per-share value even as revenue growth moderates.
- Moat Depth: Switching costs in enterprise (Active Directory, Office 365, Teams) create durable revenue base. LinkedIn and GitHub add developer network effects.
- Risks: Antitrust scrutiny intensifying; AI capex ramp may compress margins near-term; Activision integration risk; potential enterprise spending slowdown.
👔 Management Quality & Culture
CEO: Not identified · Tenure: Since 2014 (~12 yrs) · ★ Founder
⚠️ Key-Person Risk: HIGH
Founder-led company — strategy and culture deeply tied to a single individual. Succession planning is a material risk.
Net Insider Buys (12m)
-9,775 shares
Incentive Alignment
⚠️ Moderate
CEO Background & Track Record
Satya Nadella - Wikipedia
Satya Narayana Nadella (born 19 August 1967) is an American business executive. He is the chairman and chief executive officer (CEO) of Microsoft, succeeding Steve Ballmer in 2014 as CEO and John W. Thompson in 2021 as chai
Satya Narayana Nadella (born 19 August 1967) is an American business executive. He is the chairman and chief executive officer (CEO) of Microsoft, succeeding Steve Ballmer in 2014 as CEO and John W. Thompson in 2021 as chai
Microsoft's CEO: A timeline of the company's leadership and
Satya Nadella has been Microsoft's CEO since February 4, 2014, and its executive chairman since June 2021. He is the company's third CEO since its incorporation in 1975. Let's break down the company's ch
Satya Nadella has been Microsoft's CEO since February 4, 2014, and its executive chairman since June 2021. He is the company's third CEO since its incorporation in 1975. Let's break down the company's ch
Microsoft CEO History: From Gates to Nadella
William H. Gates III, known universally as Bill Gates, co-founded Microsoft Corporation with Paul Allen in 1975, just after dropping out of Harvard. Few could have predicted that this ambitious young man would go on to prof
William H. Gates III, known universally as Bill Gates, co-founded Microsoft Corporation with Paul Allen in 1975, just after dropping out of Harvard. Few could have predicted that this ambitious young man would go on to prof
Employee Ratings
Overall Rating
3.9/5 ★★★★☆
Culture Signal
Mixed
Employee Review Excerpts
Microsoft - an Incredibly great place to grow, however, some
Jul 18, 2025 · Product manager ... open to mutual growth and learning. * Exceptional cultural patience, especially within the New England management team, where time and space were generously given for individuals to grow and integr
Jul 18, 2025 · Product manager ... open to mutual growth and learning. * Exceptional cultural patience, especially within the New England management team, where time and space were generously given for individuals to grow and integr
Microsoft Reviews (53,333): Pros & Cons of Working At Micros
Employees also rated Microsoft 3.9 out of 5 for work life balance, 3.9 for culture and values and 3.8 for career opportunities. ... Project Manager(469) . Users say... "They provide great benefits and you get a lot of
Employees also rated Microsoft 3.9 out of 5 for work life balance, 3.9 for culture and values and 3.8 for career opportunities. ... Project Manager(469) . Users say... "They provide great benefits and you get a lot of
Microsoft Reviews in US | Glassdoor
The best reviews about Microsoft US have been left by employees working as Software Engineering, CEO-Founder and Customer Engineer, whereas professionals working as Senior Solution Manager, and Senior Solution Specialist ha
The best reviews about Microsoft US have been left by employees working as Software Engineering, CEO-Founder and Customer Engineer, whereas professionals working as Senior Solution Manager, and Senior Solution Specialist ha
Sources: Finnhub insider data · Brave Search (Glassdoor, Indeed, Comparably, news) · Earnings surprise data from analyst forecasts · Qualitative signals are directional only.
⚖️ DCF Verdict: Accumulate — Microsoft Corporation (MSFT)
Current price: $370.87 | Analyst Avg PT: $510.00
$216
🔴 Bear
$428
📊 Base
$712
🚀 Bull
| Tier | Price | Action |
|---|---|---|
| Tier 1 — Starter | ≤$394 | Begin position |
| Tier 2 — Add | ≤$322 | Add on weakness |
| Tier 3 — Full | ≤$205 | Full allocation |
| Sell Alert | ≥$605 | Above fair value — consider trimming |
How tiers are set: Tier 1 = Base IV × 0.92 (8% discount to base case). Tier 2 = midpoint of Bear & Base IV (building on meaningful weakness). Tier 3 = Bear IV × 1.05 (just above worst-case — maximum margin of safety). Sell alert = Bull IV × 0.85 (15% discount to bull case — above fair value range).
Accumulate with a Base target of $505. MSFT trades at a premium but earns it — 17% FCF growth, 30%+ Azure growth, and AI leadership justify the multiple. Enter on pullbacks below $355. Trim above $530.
🔧 Model Notes & Calibration
| Assumption | Rationale / Notes |
|---|---|
| FCF Base | TTM FCF of ~$77B used as base. Microsoft's FCF margin has expanded from 30% to 27% of revenue despite massive capex increases, reflecting operating leverage and cloud subscription model economics. |
| WACC | Base WACC 9.50%: Rf 4.25%, Beta 1.11, ERP 5.5%, cost of debt 3.5% (pre-tax). MSFT's AAA-equivalent balance sheet supports a below-average cost of capital. |
| Net Debt | Net debt of $48B reflects total debt of ~$58B minus cash of ~$10B on a net economic basis. MSFT also holds significant off-balance-sheet operational cash flows. |
| Shares | 7,430M diluted shares. MSFT has been aggressively buying back shares — outstanding count declining ~1% annually. |
| Sanity Check | Base IV of ~$505 is within ±20% of analyst consensus PT of $510. The premium to current price reflects Azure/AI growth trajectory and FCF generation consistency. |
| AI Capex Risk | Microsoft is investing $80B+ in AI infrastructure in FY2026. While this weighs on near-term FCF margins, it secures long-term competitive positioning and should drive Azure growth acceleration. |
Bore Family Office • Analysis generated by Lurch • Not investment advice.