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 PE valuation

A base case PE valuation for MSFT estimates a fair value of about $708.52 per share, against a current price of $390.74. The model assumes 20.0% annual earnings growth, a 23x target PE multiple, and a 10% discount rate.

Intrinsic Value

$708.52

Margin of safety

+44.9%

Expected annual return

+12.6%

Base case assumptions: 20.0% annual earnings growth, 23x target PE, 10% discount rate, 5 year projection. Data as of 2026-06-12.

This base case uses default assumptions and is not financial advice. The fair value changes significantly when the target PE or earnings growth rate changes. Open the calculator to set your own assumptions and see the full sensitivity range.

Customize the MSFT PE valuation

Adjust the target PE, earnings growth, and discount rate to see how the fair value and margin of safety for Microsoft Corporation respond.

Open PE Calculator for MSFT

Or try DCF Valuation for MSFT →

Company 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 PE Stock Valuation Data

PE Ratio (TTM)

23.2x

PEG Ratio

0.78

Earnings Yield

4.32%

ROE (TTM)

33.1%

Revenue/Share (TTM)

$42.86

Dividend Yield

0.91%

Debt/Equity

0.14x

Frequently Asked Questions

What is the PE ratio of MSFT?

The trailing twelve-month PE ratio of MSFT reflects how much investors pay per dollar of Microsoft Corporation's earnings. This metric is most useful when compared to Software - Infrastructure peers and the company's own historical range.

Is MSFT overvalued based on PE ratio?

MSFT's PE of 23.2x combined with a PEG ratio of 0.78 provides a growth-adjusted perspective. A PEG below 1.0 suggests MSFT may be undervalued relative to its earnings growth rate. Keep in mind that PE-based valuation works best for profitable, mature companies — for high-growth or cyclical Software - Infrastructure, a DCF analysis may be more appropriate.

How do I value MSFT stock using PE ratio?

To value Microsoft Corporation using PE: (1) Compare the current PE (23.2x) against the Software - Infrastructure median to assess relative pricing, (2) check the PEG ratio (0.78) to adjust for growth expectations, (3) review the 5-year PE range to identify where the stock sits historically, and (4) estimate fair value by multiplying a target PE by forward EPS estimates. This relative approach complements DCF's absolute valuation.

What is the PEG ratio of MSFT?

MSFT's PEG ratio is 0.78, calculated by dividing the PE ratio (23.2x) by the expected earnings growth rate. A PEG below 1.0 is traditionally considered a sign of undervaluation — the market may not be fully pricing in the growth potential. Note that PEG accuracy depends on the reliability of growth estimates.

Should I use PE ratio or DCF for MSFT stock valuation?

PE ratio gives a quick relative read — how MSFT is priced versus Software - Infrastructure peers. DCF provides an absolute value based on projected free cash flows. For MSFT, with a strong ROE of 33.1%, both methods are worth using — PE for a market-relative check, DCF to stress-test whether fundamentals justify the price. Each method has blind spots: PE ignores capital structure and cash flow quality, while DCF is sensitive to growth and discount rate assumptions.

Learn More

See MSFT DCF Valuation → — Intrinsic value via Discounted Cash Flow analysis
PE Methodology — Step-by-step guide to PE ratio stock valuation
DCF Methodology — Guide to discounted cash flow analysis
PE Ratio — Understanding the price-to-earnings ratio
Intrinsic Value — How to evaluate stock fair value

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P/E and DCF value MSFT with different methods and assumptions, so the two conclusions can differ. Compare the DCF intrinsic 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.