US Equities Analysis

MSFT — Microsoft

Research evidence pack

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2. Company Fundamentals

2.1 Competitiveness

Metric Value
Operating Margins 46.33%
Profit Margins 39.34%
Return on Equity 34.01%
Return on Assets 14.81%
Free Float 7.42B
Dividend Yield 0.98%
Short Int % Utilisation 1.19%

2.2 Growth

Metric Value
Revenue Growth 18.3%
Free Cash Flow 37.01B
EBITDA 16.26 (Ratio)
Enterprise Value 2998.97B
EV/Revenue 9.42
EV/EBITDA 16.26

Revenue growth of 18.3% indicates steady, moderate expansion.

2.3 Management

Role Metric
Consensus Rating N/A

2.4 Return

Metric Value
Expected Return (Ann.)* 0.97%
Risk / Std Dev (Ann.)* 32.20%
1-Year Price Return* -4.00%

Latest Market Data (as of 2026-08-14, US Eastern time):

Metric Value
Last Price $495.40
52-Week Range $349.20 – $553.72
Observation Count 251 trading days

The return and risk statistics use daily adjusted closes from the retrieved one-year series and annualise daily moments using 252 trading days. The last price is the latest regular-market price reported for the stated date. Source: Yahoo Finance market data.

2.5 FCFF DCF Valuation

Valuation basis: This research model follows a five-year, unlevered FCFF DCF. It starts from reported annual operating inputs, forecasts revenue and operating cash conversion under an explicit mechanical policy, discounts FCFF at WACC, applies a Gordon-growth terminal value, and bridges enterprise value to an indicative common-equity value per share. It is an analytical estimate rather than a recommendation or personalised target price.

Step 1 — Forecast Operating Profit and NOPAT

Reported operating input Value
Revenue $331.84B
Prior annual revenue $281.72B
EBIT $168.99B
Tax rate 19.40%
NOPAT = EBIT × (1 − tax rate) $136.20B
Forecast start-growth basis 15.00%
Forecast policy latest reported annual revenue growth, bounded to -10.00% / 15.00%

Step 2 — Calculate FCFF

Current FCFF building block Value
NOPAT $136.20B
Add: depreciation & amortisation $38.53B
Less: capital expenditure -$115.95B
Less/(add): working-capital cash-flow movement -$4.89B
Current unlevered FCFF $53.89B

Explicit FCFF forecast

Forecast year Revenue growth NOPAT D&A Capex Change in NWC FCFF Present value
1 15.00% $156.63B $44.31B -$133.34B -$5.63B $61.98B $58.92B
2 11.88% $175.23B $49.58B -$124.27B -$6.30B $94.24B $80.96B
3 8.75% $190.57B $53.91B -$108.07B -$6.85B $129.56B $100.59B
4 5.62% $201.28B $56.95B -$85.55B -$7.23B $165.45B $116.09B
5 2.50% $206.32B $58.37B -$58.37B -$7.41B $198.90B $126.12B

Step 3 — Determine the Discount Rate (WACC)

WACC input Value
Risk-free rate 4.71%
Equity risk premium assumption 5.50%
Beta 1.10
Cost of equity 10.76%
Pre-tax cost of debt 5.20%
WACC 10.65%
WACC validation within standard range

Step 4 — Estimate Terminal Value

Terminal-value input Value
Perpetuity growth rate 2.50%
Terminal value $2,500.35B
Implied terminal EV / EBITDA 7.95x
Terminal value as % of enterprise value 75.74%

Step 5 — Discount Cash Flows to Enterprise Value

Enterprise-value component Value
Present value of explicit FCFF $482.68B
Present value of terminal value $1,507.19B
Indicated enterprise value $1,989.87B
Discounting convention mid-year for explicit FCFF; terminal value discounted at year-end five

Step 6 — Convert Enterprise Value to Equity Value

Equity bridge Value
Indicated enterprise value $1,989.87B
Less: gross interest-bearing debt $56.83B
Add: cash and equivalents $76.65B
Add: affiliate investments $0.00
Less: minority interests $0.00
Indicated common equity value $2,009.69B

Step 7 — Calculate Indicative Value Per Share

Per-share output Value
Shares used 7,453,000,000.00
Share-count basis reported diluted weighted-average shares
Current market price $481.88
DCF indicative value per share $269.65
Indicative value vs. market price -44.04%

Model Integrity Checks

Check Result
Perpetuity growth is below the risk-free rate pass
Perpetuity growth is below WACC pass
WACC is within the configured operating-company range pass
Terminal-year FCFF is positive pass
Terminal capex converges to D&A pass
Terminal-value concentration within review band
Implied price differs from spot by more than 30% review required

2.6 Investor-Style Research Screen

Educational screen Result
Buffett-inspired cash-quality checks 3/4 evidenced checks
Lynch-inspired balance-and-growth checks 4/4 evidenced checks

Data lineage: Yahoo Finance public market and reported-statement data; retrieval timestamp: 2026-08-18 17:42:48.350271 UTC; latest reported fiscal period: 2026-06-30 00:00:00. Default assumptions: five-year forecast, mid-year discounting for explicit FCFF, a maximum 2.50% perpetuity-growth rate below both WACC and the risk-free rate, historical operating-ratio persistence, and capex convergence to D&A by year five. No sell-side consensus or management guidance is substituted for reported inputs. This is research and analysis only, not personalized financial advice.

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