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Microsoft Corporation

Intrinsic Value Analysis (Discounted Cash Flow)Industry: Software - InfrastructureSector: Technology

Fair Value Summary

Current Price$474.75
5Y Range272.32 – 419.61
5Y Selected345.96
(-) Safety Margin15.98%
5Y Buy Price$290.68
Upside (to Buy Price)-38.77%
10Y Range310.04 – 467.25
10Y Selected388.64
(-) Safety Margin15.98%
10Y Buy Price$326.54
Upside (to Buy Price)-31.22%

Company Predictability & Safety

MetricValue
Revenue R2 (5Y)0.9800
Revenue R2 (10Y)0.9682
Net Income R2 (5Y)0.9297
Net Income R2 (10Y)0.9487
EBITDA R2 (5Y)0.9400
EBITDA R2 (10Y)0.9562
FCF R2 (5Y)0.6777
FCF R2 (10Y)0.9515
Safety Score0.8402

DA 10-Year Projection

Metric2026202720282029203020312032203320342035
% Growth13.22%12.19%11.17%10.15%9.12%8.10%7.07%6.05%5.02%4.00%
Revenue318,965.41357,862.50397,837.25438,202.12478,173.73516,893.29553,453.35586,930.03616,419.43641,076.20
EBITDA190,815.60214,085.12237,999.33262,146.92286,059.25309,222.56331,093.99351,120.85368,762.37383,512.87
D&A-27,963.00-31,373.02-34,877.52-38,416.22-41,920.44-45,314.90-48,520.04-51,454.87-54,040.14-56,201.74
EBIT162,852.60182,712.10203,121.81223,730.70244,138.81263,907.66282,573.95299,665.98314,722.24327,311.12
Pro forma Taxes-29,865.66-33,507.71-37,250.66-41,030.14-44,772.80-48,398.23-51,821.45-54,955.97-57,717.15-60,025.84
NOPAT132,986.94149,204.39165,871.14182,700.56199,366.01215,509.44230,752.50244,710.01257,005.08267,285.29
Capital Expenditures-45,613.61-51,176.08-56,892.66-62,665.03-68,381.17-73,918.25-79,146.52-83,933.85-88,150.98-91,677.02
NWC Investment4,825.445,039.975,179.615,230.155,179.205,016.974,737.164,337.643,821.003,194.83
(+) D&A27,963.0031,373.0234,877.5238,416.2241,920.4445,314.9048,520.0451,454.8754,040.1456,201.74
Free Cash Flow120,161.77134,441.30149,035.61163,681.89178,084.48191,923.05204,863.17216,568.66226,715.24235,004.84
Diluted Shares Outstanding7,465,000,000.007,465,000,000.007,465,000,000.007,465,000,000.007,465,000,000.007,465,000,000.007,465,000,000.007,465,000,000.007,465,000,000.007,465,000,000.00

Discounting Periods

MetricJun-26Jun-27Jun-28Jun-29Jun-30Jun-31Jun-32Jun-33Jun-34Jun-35
Period Start9/30/257/1/267/1/277/1/287/1/297/1/307/1/317/1/327/1/337/1/34
Period End6/30/266/30/276/30/286/30/296/30/306/30/316/30/326/30/336/30/346/30/35
Mid-Point2/13/2612/30/2612/30/2712/30/2812/30/2912/30/3012/30/3112/30/3212/30/3312/30/34
Time (t)0.100.951.952.963.964.965.966.967.968.96
Valuation Date1/16/26

Base Case Projected Flows

WACC: 9.10%Terminal Growth: 2.48%
Metric2026202720282029203020312032203320342035TV (5y)TV (10y)
Discount Factor0.990.920.840.770.710.650.600.550.500.46
PV UFCF119,119.99123,767.54125,761.38126,491.97126,145.45124,610.85121,920.25118,138.31113,359.80107,705.62
Raw: 2,759,465.25
1,871,380.28
Raw: 3,641,461.09
1,597,823.66

Base Case Valuation

5-Year Horizon10-Year Horizon
UFCFUFCF
Enterprise Value2,492,666.602,804,844.81
(-) Net Debt34,633.5034,633.50
Equity Value2,458,033.102,770,211.31
(/) Shares Out7,465.007,465.00
Fair Value$329.27$371.09
(-) Safety Margin15.98%15.98%
Buy Price$276.66$311.79
Current Price$474.75$474.75
Upside (to Buy Price)-41.73%-34.32%

Conservative Projected Flows

WACC: 10.10%Terminal Growth: 1.98%
Metric2026202720282029203020312032203320342035TV (5y)TV (10y)
Discount Factor0.990.910.830.750.680.620.560.510.460.42
PV UFCF119,011.35122,699.34123,543.57123,121.39121,668.88119,097.09115,467.16110,869.17105,418.4199,250.59
Raw: 2,238,354.55
1,457,446.50
Raw: 2,953,790.05
1,188,902.44

Conservative Valuation

5-Year Horizon10-Year Horizon
UFCFUFCF
Enterprise Value2,067,491.042,349,049.40
(-) Net Debt34,633.5034,633.50
Equity Value2,032,857.542,314,415.90
(/) Shares Out7,465.007,465.00
Fair Value$272.32$310.04
(-) Safety Margin15.98%15.98%
Buy Price$228.80$260.49
Current Price$474.75$474.75
Upside (to Buy Price)-51.81%-45.13%

Aggressive Projected Flows

WACC: 8.10%Terminal Growth: 2.98%
Metric2026202720282029203020312032203320342035TV (5y)TV (10y)
Discount Factor0.990.930.860.790.730.680.630.580.540.50
PV UFCF119,229.73124,854.99128,039.98129,987.13130,830.24130,434.22128,798.45125,957.70121,980.99116,968.95
Raw: 3,586,278.46
2,534,062.08
Raw: 4,732,545.01
2,265,581.55

Aggressive Valuation

5-Year Horizon10-Year Horizon
UFCFUFCF
Enterprise Value3,167,004.163,522,663.94
(-) Net Debt34,633.5034,633.50
Equity Value3,132,370.663,488,030.44
(/) Shares Out7,465.007,465.00
Fair Value$419.61$467.25
(-) Safety Margin15.98%15.98%
Buy Price$352.55$392.58
Current Price$474.75$474.75
Upside (to Buy Price)-25.74%-17.31%

Reverse DCF: Market Implied Growth

Current Price$474.75
WACC Used9.1%
IMPLIED REVENUE GROWTH165.59%
Metric2027202820292030203120322033203420352036
Implied Revenue780,330.532,072,467.205,504,232.0414,618,600.6438,825,304.46103,115,496.71273,862,776.11727,347,707.491,931,750,985.335,130,506,126.45
Constant Implied Growth165.59%165.59%165.59%165.59%165.59%165.59%165.59%165.59%165.59%165.59%
Implied Free Cash Flow78.03207.25550.421,461.863,882.5310,311.5527,386.2872,734.77193,175.10513,050.61
Discount Factor0.950.840.770.710.650.600.550.500.460.42
Present Value of Implied FCF74.19174.88425.361,035.502,520.836,136.7114,939.2336,368.0888,534.54215,528.64

Rolling Historical DCF (Backtest)

Valuation based on actual realized growth.
YearValuation DateActual PriceRealized Growth (5Y)Calculated Fair ValueValuation Delta
20202020-06-30$203.5112.84%$146.80-27.87%
20192019-06-30$135.6813.70%$125.35-7.61%
20182018-06-30$98.6114.44%$106.968.47%
20172017-06-30$68.9315.31%$105.3852.88%
20162016-06-30$51.1714.31%$80.9558.21%
20152015-06-30$44.1512.56%$70.8560.48%
20142014-06-30$41.709.40%$71.6871.90%
20132013-06-30$34.367.15%$58.7771.06%
20122012-06-30$30.596.82%$70.03128.93%
20112011-06-30$26.007.48%$60.08131.08%
20102010-06-30$23.018.33%$53.98134.61%
20092009-06-30$23.778.99%$39.4766.04%
20082008-06-30$27.519.19%$45.2664.51%
20072007-06-30$29.478.40%$35.1019.10%
20062006-06-30$23.309.92%$28.9524.24%
20052005-06-30$24.8412.46%$37.7051.78%
20042004-06-30$28.5615.76%$37.8632.58%
20032003-06-30$25.6416.41%$42.2564.80%
20022002-06-30$26.3313.36%$33.9829.04%
20012001-06-30$36.5011.62%$28.86-20.93%
20002000-06-30$40.0011.39%$25.44-36.40%
19991999-06-30$45.0910.94%$30.49-32.39%
19981998-06-30$27.0910.15%$18.53-31.60%
19971997-06-30$15.8012.16%$11.46-27.44%
19961996-06-30$7.6416.27%$10.5738.30%

Monte Carlo Simulation (1,000 Iterations)

Mean Fair Value
$385.26
Median
$373.83
10th Percentile
$307.69
90th Percentile
$471.52

Fair Value Distribution

$235.89 - $266.02
7
$266.02 - $296.15
49
$296.15 - $326.27
133
$326.27 - $356.40
189
$356.40 - $386.53
205
$386.53 - $416.65
152
$416.65 - $446.78
120
$446.78 - $476.90
52
$476.90 - $507.03
35
$507.03 - $537.16
20
$537.16 - $567.28
17
$567.28 - $597.41
7
$597.41 - $627.54
3
$627.54 - $657.66
1
$657.66 - $687.79
2
$687.79 - $717.92
3
$717.92 - $748.04
3
$748.04 - $778.17
1
$778.17 - $808.29
0
$808.29 - $838.42
1