Microsoft Corporation (MSFT) Stock Valuation — PE Analysis
Software - Infrastructure · NASDAQ
Current Price
$390.54
PE Ratio (TTM)
21.7x
Intrinsic Value
$698.06
+44.1% margin of safety
COMPETITIVE MOAT
↑Dominant Cloud Ecosystem
Azure's deep integration with Microsoft's enterprise software creates significant switching costs for businesses. This lock-in is reinforced by a vast partner network and developer community.
↑Office Productivity Suite Dominance
Microsoft 365's ubiquitous presence in businesses worldwide fosters strong network effects and high switching costs. Its deep integration across devices and services is difficult to replicate.
↑Extensive Enterprise Relationships
Decades of serving large enterprises have built deep trust and embedded Microsoft solutions into critical workflows. This established customer base provides a stable revenue stream.
INVESTMENT RISKS
↓Securities Class Action Lawsuits
Multiple class action lawsuits alleging securities fraud could lead to significant legal costs and reputational damage for Microsoft.
↓Regulatory Scrutiny
Microsoft faces ongoing antitrust and regulatory scrutiny globally, which could lead to forced divestitures or restrictions on its business practices.
↓Dependence on Enterprise Spending
A significant portion of Microsoft's revenue relies on enterprise IT budgets, making it vulnerable to economic downturns and shifts in corporate spending priorities.
Base case
MSFT base case PE valuation
A base case PE valuation for MSFT estimates a fair value of about $698.06 per share, against a current price of $390.54. The model assumes 18.9% annual earnings growth, a 22x target PE multiple, and a 10% discount rate.
Intrinsic Value
$698.06
Margin of safety
+44.1%
Expected annual return
+12.3%
Base case assumptions: 18.9% annual earnings growth, 22x target PE, 10% discount rate, 5 year projection. Data as of 2026-07-29.
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 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 PE Stock Valuation Data
PE Ratio (TTM)
21.7x
PEG Ratio
0.69
Earnings Yield
4.61%
ROE (TTM)
35.4%
Revenue/Share (TTM)
$44.67
Dividend Yield
0.91%
Debt/Equity
0.30x
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 21.7x combined with a PEG ratio of 0.69 provides a growth-adjusted perspective. A PEG below 1.0 means the P/E is low relative to the 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 (21.7x) against the Software - Infrastructure median to assess relative pricing, (2) check the PEG ratio (0.69) 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 0.69, calculated by dividing the PE ratio (21.7x) by the expected earnings growth rate. A PEG below 1.0 means the P/E is low relative to the expected earnings growth rate. 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 35.4%, 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
Related PE Valuations
All Technology valuationsP/E and DCF value MSFT with different methods and assumptions, so the two conclusions can differ. Compare the DCF intrinsic value.
Price as of 2026-07-29. Financial data from Financial Modeling Prep (trailing twelve months) · Valuation methodology by Charlie Wang.
This is an estimate, not investment advice.