Microsoft Corporation (MSFT) Intrinsic Value & DCF Valuation
Software - Infrastructure · NASDAQ
Current Price
$390.74
Intrinsic Value
$518.36
+24.6% margin of safety
What Is Microsoft Corporation's Intrinsic Value?
As of 2026-06-12, our base-case DCF model estimates the intrinsic value of Microsoft Corporation (MSFT) at $518.36 per share, compared with a market price of $390.74, a margin of safety of +24.6%. The base case assumes 19.9% annual free cash flow growth and a 10.0% discount rate.
Across the sensitivity grid the estimate spans $436.66 to $610.32. Intrinsic value is an estimate built on assumptions, not a fact. A higher discount rate or slower growth pushes the estimate down, while stronger cash flow growth lifts it.
How our DCF works · Recalculate with your own assumptions · What is intrinsic value?
Is Microsoft Corporation (MSFT) Undervalued?
At $390.74, MSFT trades about 24.6% below our base-case intrinsic value estimate. That is a real discount, but it stays short of the 30% margin of safety we require before calling a stock undervalued.
COMPETITIVE MOAT
↑Dominant Cloud Ecosystem
Azure's deep integration with Microsoft's enterprise software suite creates sticky customer relationships. This ecosystem lock-in makes switching to competitors difficult and costly for businesses.
↑AI Leadership & Integration
Microsoft's aggressive investment and integration of AI across its product portfolio, from Azure to Office, positions it to capture future growth. This provides a significant competitive advantage.
↑Strong Enterprise Software Franchise
Windows and Office remain foundational tools for businesses globally. Their widespread adoption and network effects create a durable competitive advantage.
INVESTMENT RISKS
↓Xbox Spinoff Uncertainty
The potential spinoff or restructuring of Xbox introduces strategic uncertainty and could dilute focus on core growth areas. It may impact future gaming strategy.
↓AI Spending Volatility
Concerns over AI spending sustainability can lead to stock price pressure. Fluctuations in AI investment could impact Microsoft's growth trajectory.
↓Investor Sentiment Shifts
Significant portfolio adjustments by major investors like David Tepper signal potential shifts in market perception. This can create short-term volatility.
Base case
MSFT base case valuation
Intrinsic Value
$518.36
Margin of safety
+24.6%
Expected annual return
+5.8%
Base case assumptions: 19.9% annual growth, 10.0% discount rate, 30x exit multiple, 5 year projection. Data as of 2026-06-12.
This base case uses default assumptions and is not financial advice. The intrinsic value changes significantly when the growth rate or discount rate changes. Open the calculator to set your own assumptions and see the full sensitivity range.
Customize the MSFT valuation
Adjust the growth rate, discount rate, and exit multiple to see how the intrinsic value and margin of safety for Microsoft Corporation respond.
Open DCF Calculator for MSFTCompany Overview
Microsoft Corporation is a prominent global technology firm that invents, markets, and provides ongoing assistance for a diverse range of software, digital services, computing devices, and comprehensive solutions. Its operations are organized into three primary divisions: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. The Productivity and Business Processes segment delivers crucial tools for both enterprises and individual users. This includes the extensive Office suite (comprising Exchange, SharePoint, Microsoft Teams, Office 365 Security and Compliance, Microsoft Viva, and Skype for Business), along with popular consumer offerings like Skype, Outlook.com, OneDrive, and LinkedIn. It also features Dynamics 365, a suite of integrated cloud and on-premises business applications tailored for organizations. The Intelligent Cloud division focuses on sophisticated infrastructure and platform services. Here, Microsoft licenses key products such as SQL Server, Windows Servers, Visual Studio, System Center, and associated Client Access Licenses. It also includes GitHub, a leading platform for developer collaboration and code hosting; Nuance, offering advanced AI solutions for healthcare and businesses; and Azure, its expansive cloud computing platform. This segment further encompasses enterprise support, Microsoft consulting services, and Nuance professional services, assisting clients with the development, deployment, and management of Microsoft's server and desktop technologies, alongside offering product training and certification. Finally, the More Personal Computing segment covers a broad spectrum of consumer and commercial computing experiences. It generates revenue through Windows operating system licensing, including agreements with original equipment manufacturers (OEMs), non-volume licensing, and various Windows Commercial offerings (such as volume licensing and cloud services), as well as patent licensing and Windows Internet of Things (IoT). This division also supplies its own hardware, including Surface devices, PC accessories, and gaming/entertainment consoles. Its Gaming portfolio features Xbox hardware, content, and subscription services, in addition to video games and royalties from third-party titles. Furthermore, it manages search services like Bing and Microsoft's advertising platforms. Microsoft distributes its extensive product line via numerous channels, including original equipment manufacturers, wholesale distributors, and various resellers, complementing direct sales through digital marketplaces, its own online storefronts, and physical retail outlets. The company, established in 1975, maintains its headquarters in Redmond, Washington.
Financial Metrics — MSFT Stock Valuation Data
Revenue/Share (TTM)
$42.86
FCF/Share (TTM)
$9.82
ROIC (TTM)
21.3%
ROE (TTM)
33.1%
P/FCF
39.8x
EV/EBITDA
14.6x
FCF Yield
2.51%
Debt/Equity
0.14x
Based on trailing twelve-month data, MSFT shows a free cash flow per share of $9.82 and a ROIC of 21.3%, key inputs for stock valuation using the DCF method. The P/FCF ratio of 39.8x and FCF yield of 2.51% are important context metrics when evaluating MSFT's stock valuation relative to peers.
Frequently Asked Questions
What is the intrinsic value of MSFT?
Microsoft Corporation currently generates $9.82 in free cash flow per share. At the current price of $390.74, a DCF model would discount these cash flows at an appropriate WACC and apply a terminal growth rate to arrive at an intrinsic value. The result depends heavily on your growth and discount rate assumptions — a 1% change in WACC typically shifts the fair value estimate by 10-15%. In MiniValuator the model uses a single discount rate that you can edit directly, 10% by default, rather than a computed WACC.
Is MSFT undervalued?
MSFT trades at a P/FCF ratio of 39.8x with a free cash flow yield of 2.51%. This P/FCF is in a moderate range. However, whether MSFT is truly undervalued requires comparing the DCF intrinsic value to the current market price and evaluating whether the margin of safety is sufficient for your risk tolerance.
How do I value MSFT stock using DCF?
To perform a DCF valuation on Microsoft Corporation: (1) Start with the trailing free cash flow per share ($9.82) 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 — with a debt-to-equity of 0.14x, capital structure is an important factor, and (4) add a terminal value for cash flows beyond the projection period.
What is DCF valuation and how does it apply to MSFT?
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 company will produce over the next 5-10 years, shaped by Software - Infrastructure trends, 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.
How does WACC affect MSFT stock valuation?
WACC (Weighted Average Cost of Capital) is the discount rate in a DCF model — it reflects the minimum return investors require. For MSFT, with a debt-to-equity ratio of 0.14x, the capital structure directly influences WACC. A 1% increase in WACC typically reduces the intrinsic value by 10-15%. At an EV/EBITDA of 14.6x, the market's implied discount rate can be reverse-engineered for comparison. In MiniValuator you set this discount rate yourself as a single editable number, 10% by default, instead of computing a formal WACC.
Learn More
- See MSFT PE Valuation → — Earnings-based stock valuation using PE ratio analysis
- DCF Methodology — Step-by-step guide to discounted cash flow analysis
- PE Methodology — Guide to PE ratio stock valuation
- WACC — Understanding the discount rate used in DCF
- Margin of Safety — How to evaluate downside protection
- Intrinsic Value — How to evaluate stock fair value
- How to Calculate Intrinsic Value — Complete guide for investors
Related Valuations
All Technology valuationsDCF and P/E value MSFT with different methods and assumptions, so the two conclusions can differ. Compare the P/E fair value.
Price as of 2026-06-12. Financial data from Financial Modeling Prep (trailing twelve months) · Valuation methodology by Charlie Wang.
This is an estimate, not investment advice.