Software - Infrastructure · NASDAQ
Current Price
$424.46
Intrinsic Value
Use the calculator below to estimate
Run a full DCF analysis on Microsoft Corporation with auto-filled fundamentals, adjustable assumptions, and sensitivity heatmap.
Microsoft Corporation develops, licenses, and supports software, services, devices, and solutions worldwide. The company operates in three segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. The Productivity and Business Processes segment offers Office, Exchange, SharePoint, Microsoft Teams, Office 365 Security and Compliance, Microsoft Viva, and Skype for Business; Skype, Outlook.com, OneDrive, and LinkedIn; and Dynamics 365, a set of cloud-based and on-premises business solutions for organizations and enterprise divisions. The Intelligent Cloud segment licenses SQL, Windows Servers, Visual Studio, System Center, and related Client Access Licenses; GitHub that provides a collaboration platform and code hosting service for developers; Nuance provides healthcare and enterprise AI solutions; and Azure, a cloud platform. It also offers enterprise support, Microsoft consulting, and nuance professional services to assist customers in developing, deploying, and managing Microsoft server and desktop solutions; and training and certification on Microsoft products. The More Personal Computing segment provides Windows original equipment manufacturer (OEM) licensing and other non-volume licensing of the Windows operating system; Windows Commercial, such as volume licensing of the Windows operating system, Windows cloud services, and other Windows commercial offerings; patent licensing; and Windows Internet of Things. It also offers Surface, PC accessories, PCs, tablets, gaming and entertainment consoles, and other devices; Gaming, including Xbox hardware, and Xbox content and services; video games and third-party video game royalties; and Search, including Bing and Microsoft advertising. The company sells its products through OEMs, distributors, and resellers; and directly through digital marketplaces, online stores, and retail stores. Microsoft Corporation was founded in 1975 and is headquartered in Redmond, Washington.
ROIC (TTM)
21.3%
ROE (TTM)
33.1%
FCF Yield
2.31%
Based on trailing twelve-month data, MSFT shows a free cash flow per share of N/A and a ROIC of 21.3%, key inputs for stock valuation using the DCF method. The P/FCF ratio of N/A and FCF yield of 2.31% are important context metrics when evaluating MSFT's stock valuation relative to peers.
The intrinsic value of MSFT depends on assumptions about future growth rate, discount rate (WACC), and terminal value. A DCF model discounts projected free cash flows back to present value — small changes in WACC can shift the estimate by 20% or more, which is why sensitivity analysis is essential.
Whether MSFT is undervalued depends on comparing the DCF-derived intrinsic value to the current market price of $424.46. A positive margin of safety (intrinsic value above market price) suggests potential undervaluation, but the degree of confidence depends on the reliability of your growth and discount rate assumptions.
To perform a DCF valuation on Microsoft Corporation: (1) Start with the trailing free cash flow per share as the base, (2) project future FCF growth over 5-10 years based on Software - Infrastructure industry trends and company fundamentals, (3) apply a discount rate (WACC) reflecting MSFT's risk profile, and (4) add a terminal value for cash flows beyond the projection period.
DCF (Discounted Cash Flow) estimates what a company is worth today based on its future cash generation. For Microsoft Corporation, this means projecting how much free cash flow the Software - Infrastructure will produce over the next 5-10 years, then discounting those amounts to today's dollars. MSFT's ROIC of 21.3% indicates strong capital efficiency, which supports higher growth assumptions in the DCF model.
WACC (Weighted Average Cost of Capital) is the discount rate in a DCF model — it reflects the minimum return investors require. For MSFT, the capital structure and equity risk premium determine WACC. A 1% increase in WACC typically reduces the intrinsic value by 10-15%.
