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    MSFT · NMS · Technology

    Microsoft Corporation

    Also onShortfallConsensus DriftCrosscheck

    Implied value per share

    USD 475.07

    Market price

    USD 507.12

    Implied upside

    -6.3%

    10-year forecast · Perpetuity growth terminal value · Mid-year discounting · Base case · Price 2026-11-02 · Accounts to 2026-06-30

    AdjustedCapital expenditure runs at 22.3% of revenue against depreciation of 9.3%. A perpetuity has to be a steady state, so the forecast tapers capex to maintenance at depreciation plus the reinvestment terminal growth requires (g/ROIC of NOPAT), and the terminal year carries on from there. The bridge is shown under Terminal Value.

    Value Per Share

    Perpetuity growth
    USD 475.07-6.3%
    Exit multiple
    USD 797.04+57.2%
    Market price
    USD 507.12

    Same forecast, different terminal treatment. Percentages vs price.

    Forecast Cashflows

    Reporting currency (USD). Outflows negative.

    0bn169bn337bnFY27FY28FY29FY30FY31FY32FY33FY34FY35FY36
    Nominal FCFFDiscounted to todayUSD
    LineFY27FY28FY29FY30FY31FY32FY33FY34FY35FY36CAGR
    RevenueUSD 395.8bnUSD 475.9bnUSD 561.7bnUSD 650.4bnUSD 738.7bnUSD 822.7bnUSD 897.9bnUSD 960.2bnUSD 1005.5bnUSD 1030.6bn+11.2%
    EBITUSD 177.0bnUSD 212.8bnUSD 251.1bnUSD 290.8bnUSD 330.2bnUSD 367.8bnUSD 401.4bnUSD 429.3bnUSD 449.5bnUSD 460.7bn+11.2%
    NOPATUSD 144.0bnUSD 173.2bnUSD 204.4bnUSD 236.7bnUSD 268.8bnUSD 299.4bnUSD 326.7bnUSD 349.4bnUSD 365.9bnUSD 375.0bn+11.2%
    Add depreciation & amortisationUSD 36.8bnUSD 44.2bnUSD 52.2bnUSD 60.4bnUSD 68.6bnUSD 76.4bnUSD 83.4bnUSD 89.2bnUSD 93.4bnUSD 95.7bn+11.2%
    Less capital expenditureUSD -88.3bnUSD -101.1bnUSD -113.2bnUSD -124.1bnUSD -133.0bnUSD -139.2bnUSD -142.2bnUSD -141.7bnUSD -137.6bnUSD -129.9bn+4.4%
    Capex, % of revenue22.3%21.2%20.2%19.1%18.0%16.9%15.8%14.8%13.7%12.6%-
    Less increase in working capitalUSD -9.6bnUSD -12.0bnUSD -12.9bnUSD -13.3bnUSD -13.3bnUSD -12.6bnUSD -11.3bnUSD -9.4bnUSD -6.8bnUSD -3.8bn-9.9%
    Free cashflow to firmUSD 82.8bnUSD 104.3bnUSD 130.4bnUSD 159.6bnUSD 191.2bnUSD 223.9bnUSD 256.6bnUSD 287.5bnUSD 314.9bnUSD 337.1bn+16.9%
    Discount factor0.95700.87660.80290.73540.67360.61700.56510.51760.47410.4342-
    Present valueUSD 79.3bnUSD 91.4bnUSD 104.7bnUSD 117.4bnUSD 128.8bnUSD 138.2bnUSD 145.0bnUSD 148.8bnUSD 149.3bnUSD 146.4bn-
    Present Value Of The ForecastUSD 1249.2bn

    Discount Rate

    Source shown per component. All overridable above.

    Risk-free rate4.89%US 10-year Treasury (^TNX), 2026-11-02
    Equity risk premium4.23%Damodaran, January 2026
    Beta1.030Reported 1.045, pulled toward 1.0 (Blume)
    Cost of equity9.25%Risk-free + beta x equity risk premium
    Cost of debt5.29%Risk-free + 40bp, the spread for a AAA rating at 50.9x interest cover. Book interest / average debt was lower, at 5.2%.
    Market capitalisationUSD 3766.0bn98.5% of capital
    Total debtUSD 56.8bn1.5% of capital, book value as a proxy
    Tax rate18.6%Effective, capped at statutory
    WACC9.18%E/V x Re + D/V x Rd x (1 - t)

    Terminal Value

    Perpetuity growth is intrinsic. The exit multiple defaults to the company's current EV/EBITDA, so it answers a different question - what the shares are worth if today's rating holds and EBITDA grows as forecast.

    Perpetuity growth at 2.50%

    Value per shareUSD 475.07

    65% of EV

    Forecast FCFF, final year
    USD 337.1bn
    Capex at depreciation, working capital in reinvestment
    USD 375.0bn
    Less reinvestment at g/ROIC (9.1% of NOPAT)
    USD -34.2bn
    Capitalised
    USD 340.9bn
    ROIC (reported)
    27.4%
    Terminal value, undiscounted
    USD 5231.6bn
    Terminal value, discounted
    USD 2271.7bn
    Enterprise value
    USD 3520.9bn
    Less net debt
    USD -19.8bn
    Equity value
    USD 3540.7bn

    Exit at 19.3x EBITDA

    Value per shareUSD 797.04

    79% of EV

    Terminal value, undiscounted
    USD 10757.8bn
    Terminal value, discounted
    USD 4671.3bn
    Enterprise value
    USD 5920.5bn
    Less net debt
    USD -19.8bn
    Equity value
    USD 5940.3bn

    Spread between methods: 51%.

    Sensitivity

    Value per share (USD) by discount rate and long-run growth.

    Long-run growth
    Discount rate1.50%2.00%2.50%3.00%3.50%
    7.18%633.51666.61707.20757.98823.09
    8.18%526.24546.34570.30599.25634.78
    9.18%447.59460.25475.07492.57513.46
    10.18%387.64395.77405.19416.14428.98
    11.18%340.54345.81351.85358.83366.92

    Outlined: this model. Green text: above today's price of 507.12. Shading: distance from this model's own value.

    Priced In

    What each input would have to be to justify the current price, one at a time.

    InputActualModelImplied
    Revenue growth, a year16.1%12.0%12.8%
    EBIT margin46.8%44.7%47.5%
    Discount rate-9.2%8.8%
    Download as Excel

    Live formulas, not pasted numbers - edit a driver and the workbook reprices.

    Yahoo Finance and RBA data. General information, not advice. Methodology.