Is Microsoft Corporation (MSFT) overvalued or undervalued?
Updated Nov 10, 2026 · hand-researched model · educational, not advice
At a recent price of $545.18, Microsoft Corporation (MSFT) trades 82% above TickerWorth's blended fair value of $300.09 per share — a discounted-cash-flow model cross-checked against peer multiples and asset value — meaning the market currently prices MSFT overvalued vs our estimate of what the business is intrinsically worth. Our fair value sits below the market, an implied -45.0% move to close the gap if the business performs in line with our assumptions. This is an educational model, not a price target or a recommendation — the value moves with the inputs, which you can test yourself using the WACC slider below.
One of the lenses behind that blended figure is a discounted-cash-flow model, which on its own values MSFT at about $221.35 per share. The rest of this page walks through that DCF — its assumptions, reverse-DCF and discount-rate sensitivity — because it is the auditable anchor of the blend.
The valuation discounts Microsoft Corporation's projected free cash flows at a weighted-average cost of capital (WACC) of 10.6%, with a long-run terminal growth rate of 2.5%. About 74% of the enterprise value comes from the terminal value — the portion beyond the explicit forecast window — which is typical for a stable, cash-generative business and a reminder that small changes in the discount rate or terminal growth assumption swing the intrinsic value meaningfully.
Running the DCF in reverse — solving for the growth the current price already assumes — MSFT would need sustained revenue growth of more than 25%/yr to justify today's price, against about 12.2% a year compounded in our base case. We don't quote a precise figure here, because past about 25% a year the reverse-DCF stops being informative: it solves for revenue growth alone, holding margins, capital intensity and the forecast horizon fixed, so a price well above our fair value has nowhere to go but growth. The honest reading is that the price implies growth this model can't reconcile — not that we forecast it.
Sensitivity matters more than any single number. Across a reasonable band of discount-rate assumptions, MSFT's modeled DCF value ranges from about $170.61 to $316.78 per share. If that range still sits below today's price, the market is optimistic relative to the model across the whole band; if it brackets the price, the stock is roughly fairly valued on our assumptions. Use the interactive slider to see exactly where your own cost-of-capital view lands.
How to read this page: the DCF fair value is what Microsoft Corporation would be worth if its cash flows grow as modeled and are discounted at the stated WACC. The assumptions table shows every input and its source; the reverse-DCF shows what the market believes; the sensitivity band shows how fragile the answer is. None of this is investment advice — it is a transparent, auditable framework for forming your own view of MSFT's intrinsic value. Figures update as new filings and prices come in.
The assumptions behind MSFT's DCF
| Input | Value | Source |
|---|---|---|
| Base-year revenue | $331,839,000,000 | Microsoft FY2026 Q4 earnings release, 8-K Ex-99.1 (accession 0001193125-26-323632, filed 2026-07-29): Total revenue FY2026 (year to 2026-06-30) $331,839M, +17.8% on FY2025's $281,724M (+16% constant currency); ties to the FY2026 10-K. Quarterly shape: Q1 $77,673M (+18.4%), Q2 $81,273M (+16.7%), Q3 $82,886M (+18.3%), Q4 $90,007M (+17.7%) — no deceleration through the year. Mix matters for everything below: on the restated FY27 basis (8-K 2026-09-02) Azure was $101,938M (31% of revenue, +40%), Microsoft 365 cloud $100,299M, and the whole Agents and Infra segment $268,127M (81%). CONCENTRATION, read off the 10-K related-party note: revenue from commercial arrangements with OpenAI was $24.1B in FY2026 (7.3% of revenue) with $6.0B of receivables outstanding. REFRESH CROSS-CHECK — Q1 FY2027 is now filed (10-Q accession 0001193125-26-436133, filed 2026-10-28): revenue $92,279M, +18.8% on Q1 FY2026, ABOVE the $89.85-90.95B outlook; Azure +48% against a 44-45% guide. The base year does not change (FY2027 is Year 1 of the forecast); the Q1 print is built into the Year-1 growth input — see forecast. |
| Base EBIT margin | 46.8% | Microsoft FY2026 Q4 earnings release, 8-K Ex-99.1 (accession 0001193125-26-323632, filed 2026-07-29): GAAP operating income $155,237M / revenue $331,839M = 46.78% (FY2025: $128,528M / $281,724M = 45.62%). Unlike IBM this is a reported line, not a derivation. It EXCLUDES other income of $10,697M, which included $6.5B of net OpenAI gains (mostly the October 2025 recapitalisation dilution gain) and a $3.2B Anthropic gain — excluded deliberately: they are investment marks, and the investments themselves are credited in the net-debt bridge at book value. It INCLUDES finance-lease amortisation ($5,403M) but NOT finance-lease interest ($2,547M, below the line) — consistent with treating finance leases as debt (see market.net_debt). It also absorbs XBOX impairment/severance and Voluntary Retirement Program costs flagged in the release, so it is if anything slightly depressed by one-offs. REFRESH CROSS-CHECK: Q1 FY2027 operating income was $45,915M on $92,279M = 49.75%, UP from 48.87% in Q1 FY2026 — the margin held in Q1, ahead of the depreciation-driven fade the forecast assumes for the rest of the year (Q2 is guided to a slightly lower margin year over year). |
| Forecast revenue growth | 17% → 14% → 12% → 10% → 8% | Assumption — TickerWorth's 5-year explicit forecast |
| Risk-free rate | 5.2% | US 10Y Treasury constant maturity (FRED DGS10): 5.24% on 2026-10-01, the latest published observation. House input shared by every model refreshed on 2026-10-03. |
| Beta | 1.11 | Yahoo Finance 5Y-monthly beta via yfinance: Published 5Y-monthly beta 1.108, used AS PUBLISHED — no normalization, and NOT re-measured on this quarterly refresh (quarterly-refresh convention, as in MA/HOOD/COIN/APP). I considered pulling it toward 1.0 (Microsoft is one of the largest weights in the index it is regressed against, and its cash flows are among the least cyclical in the tracker) but the five-year window includes the 2022 drawdown and the 2026 AI-capex repricing, which is genuine risk, so I left it. Sensitivity (engine re-runs at the refreshed inputs): beta 1.0 gives $237.95; 0.9 gives $255.54. Closing the gap through beta alone would need ~0.17 — i.e. it cannot be done with any defensible beta. The reverse DCF in the explainer shows what beta would close the gap. |
| Terminal growth | 2.5% | Assumption — house default: House default 2.5% (roughly long-run nominal GDP), kept for comparability. Arguably LOW for Microsoft — it ends the explicit forecast still growing 8% and owns several franchises with no obvious ceiling — but a perpetuity rate above nominal GDP claims a company eventually becomes the economy. Engine re-runs at the refreshed inputs: 3.0% gives $233.03; 3.5% gives $246.36. Must stay well below WACC (10.62%). |
| Diluted shares | 7,446M | Microsoft Q1 FY2027 earnings release, 8-K Ex-99.1 (accession 0001193125-26-436122, filed 2026-10-28): Q1 FY2027 weighted-average diluted shares 7,446M (Q4 FY2026 7,443M; FY2026 7,453M; FY2025 7,465M). Outstanding 7,426M at 2026-10-22 (10-Q cover). The count is drifting DOWN ~0.3%/yr: buybacks ($22.3B in FY2026; $4,379M in Q1 FY2027) more than offset stock-based compensation ($12,405M in FY2026; $3,134M in Q1 FY2027). Using the diluted figure is how this model carries SBC dilution. |
| Market price | $545.18 | Delayed quote · as of 2026-11-10 05:02 UTC |
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