Microsoft DCF valuation

Deterministic FCFF

Microsoft's Base DCF, using a trailing-four-quarter revenue baseline through 2026-06-30, estimates $242.08 per diluted share, 50.7% below the $491.25 market reference. The Bear-to-Bull range is $162.55 to $359.05.

Market reference

$491.25

Implied downside

-50.7%

Base case

$242.08

Fair value per share

Scenario range

$162.55–$359.05

Bear to Bull

Enterprise value

$1.94tn

Base DCF

Terminal value

77.0%

Share of enterprise value

Three scenarios

Same engine, explicit assumptions

bear

$162.55

15.2% initial growth, 44.2% EBIT margin, and 11.1% WACC.

base

$242.08

17.7% initial growth, 46.3% EBIT margin, and 9.9% WACC.

bull

$359.05

19.4% initial growth, 49.3% EBIT margin, and 8.8% WACC.

Five-year FCFF forecast

Values in USD billions

Forecast year	Revenue	EBIT	FCFF
FY 2027	390.7	181	128.3
FY 2028	446.9	207	96.1
FY 2029	496.1	229.9	90.6
FY 2030	534.2	247.5	105.4
FY 2031	557.3	258.2	144.6

Sensitivity matrix

Fair value per share across WACC and terminal growth

WACC \ growth	1.5%	2.0%	2.5%	3.0%	3.5%
7.9%	$318.35	$331.09	$346.08	$364.01	$385.87
8.9%	$269.05	$276.86	$285.80	$296.14	$308.28
9.9%	$231.77	$236.64	$242.08	$248.23	$255.24
10.9%	$202.63	$205.67	$208.99	$212.66	$216.75
11.9%	$179.28	$181.13	$183.11	$185.25	$187.58

Public evidence

Inspectable inputs used by the model

E01

Microsoft annual report

MSFT / SEC · Jul 29, 2026 · Business, risk factors, and audited financial statements

E02

Daily Treasury par yield curve rates

U.S. Department of the Treasury · Sep 8, 2026 · Ten-year Treasury rate, September 2026 daily table

E03

Implied equity risk premium and country-risk update

Aswath Damodaran, NYU Stern · Sep 1, 2026 · Current implied premium, Treasury rate, and U.S. default spread

E04

Software (System & Application) industry beta dataset

Aswath Damodaran, NYU Stern · Jan 31, 2026 · Global industry betas, January 2026

E05

Ratings and default-spread reference table

Aswath Damodaran, NYU Stern · Jan 31, 2026 · High-grade corporate default-spread reference

E06

Federal Reserve inflation objective

Board of Governors of the Federal Reserve System · Aug 22, 2025 · Longer-run inflation goal

Investor workspace

Turn the public case into your own model

Edit assumptions, save immutable versions, compare Bear/Base/Bull, monitor the next filing, and export the formula-driven workbook.

Open model See Investor plan

Model baseline

$331.84bn

Trailing-four-quarter revenue

Four reported quarters through 2026-06-30: 2026-06-30, 2026-03-31, 2025-12-31, 2025-09-30. Missing opening-balance facts stop publication instead of becoming zero.

Key assumptions

Approved Base case

Initial revenue growth

17.7%

The consensus-estimate scenario candidates are selected for revenue growth because the annual filing describes cloud and software economics, artificial-intelligence investment, competition, and operating results, all of which are relevant context for a forward growth assumption.

EBIT margin

46.3%

The consensus-estimate scenario candidates are selected for EBIT margin because the annual filing provides context on cloud and software economics, artificial-intelligence investment, competition, and operating results.

Cash tax rate

18.6%

The historical-actuals scenario candidates are selected for tax rate because the annual filing includes audited financial statements and operating results, providing an appropriate reported-financial context for this driver.

Capital expenditure

20.5%

The historical-actuals scenario candidates are selected for capital expenditure as a share of revenue because the annual filing discusses artificial-intelligence investment, cash generation, and audited financial statements.

Depreciation & amortization

10.3%

The historical-actuals scenario candidates are selected for depreciation and amortization as a share of revenue because the annual filing includes audited financial statements and discusses investment and operating results.

Operating working capital

-12.7%

The historical-actuals scenario candidates are selected for net working capital as a share of revenue because the annual filing includes audited financial statements, operating results, and cash-generation context.

Discount rate

9.9%

The public-research scenario candidates are selected for WACC because the evidence set supplies Treasury-yield, implied-equity-risk-premium, industry-beta, and credit-spread inputs, while the annual filing supplies capital-structure context.

Terminal growth

2.5%

The public-research scenario candidates are selected for terminal growth because the central bank's longer-run inflation objective anchors the nominal terminal-growth envelope.

Terminal marginal ROIC

13.9%

The public-research scenario candidates are selected for terminal ROIC because the annual filing provides business, investment, cash-generation, and capital-structure context, while the market evidence set provides valuation and credit inputs.

Reverse DCF

Abstained

The bounded solver abstained because the market reference was not bracketed.

Model checks

NEGATIVE OPERATING NWCNegative operating NWC is allowed; a further decrease is a source of FCFF and an increase is a use of FCFF.
HIGH TERMINAL VALUE SHAREThe present value of the terminal value exceeds 75% of enterprise value.

Confidence state

The Atlas Confidence Score remains unavailable until its locked calibration study is complete.