One-glance verdict
Overvalued
$253.51 our estimate vs market $390.34
Wall Street consensus: $556.75 (119.6% higher than our fair-value estimate)
54% above our estimate, beyond the bull case
Fundamentals snapshot
Microsoft Corporation
MSFT · NMS · Technology · Software - Infrastructure
Current price
$390.34
52-week range
$349.20 - $555.45
Market cap
$2.90T
Balance sheet
Healthy
53.89x Strong cushion
Net debt $47.20B. Interest coverage shows how many times profit covers the interest bill.
What stands out
3 Rewards
1 Risk
3 rewards · 1 risks
- Reward Revenue grew 13.0% last year.
- Reward Returns 34.0% on equity, ahead of 33% of its peers.
- Reward Free cash flow was positive in 10/10 years.
- Risk Insider ownership is only 0.1% (peer median: 3.0%).
What this company does
Microsoft Corporation
Microsoft primarily makes money by renting out its massive computer network to businesses through its Azure cloud service and by selling subscriptions to its Office and Windows software. This business model provides strong recurring revenue (income that comes in consistently, like a gym membership), and its products are so interconnected that they create a powerful ecosystem (a family of products that work so well together it's hard for customers to switch to a competitor). The deep integration of these tools into daily work and home life is central to the company's success.
How the company got here
Founded in 1975 by Bill Gates and Paul Allen, Microsoft's big break came when it created the operating system for IBM's first personal computer. Instead of selling the software, they licensed it, a decision that allowed their MS-DOS to be on computers from hundreds of manufacturers. This set the stage for Windows, especially Windows 95, which made computers much easier for everyday people to use with its graphical interface. The company further solidified its position with the Microsoft Office suite of productivity tools like Word and Excel. More recently, under CEO Satya Nadella, Microsoft has shifted its focus to cloud computing with Azure and embraced open-source software, a major cultural change for the company.
What it actually does
Most people know Microsoft for its Windows operating system that runs on most personal computers and for the Office suite of products like Word for writing documents, Excel for spreadsheets, and PowerPoint for presentations. The company also makes its own line of computers and tablets called Surface, and the popular Xbox gaming console. Beyond products for your home, Microsoft is a huge provider of services for other businesses, including cloud computing (renting computing power and storage over the internet) through its Azure platform. They also own LinkedIn, the professional networking site, and the search engine Bing.
Productivity and Business Processes
This is Microsoft's oldest and most well-known business, centered around its Microsoft 365 (formerly Office 365) products. Businesses and individual consumers pay subscription fees for access to applications like Word, Excel, Teams (for workplace communication), and Outlook for email. This segment also includes LinkedIn, which makes money from premium subscriptions and by charging companies for hiring and marketing tools, and Dynamics 365, which offers a suite of business management applications. This part of the company represents a very large portion of Microsoft's overall business.
Intelligent Cloud
This is Microsoft's fastest-growing and largest business segment. The main product here is Azure, a cloud computing platform that allows businesses to rent servers, storage, and other computing services instead of buying and managing their own. This is a huge business as more companies move their operations online and need powerful, flexible computing resources for everything from websites to artificial intelligence applications. This segment also includes other products for businesses like SQL Server for managing databases and GitHub, a platform for software developers.
More Personal Computing
This segment contains the products and services most familiar to consumers. It includes the revenue Microsoft earns from its Windows operating system, primarily through licenses sold to computer makers (known as OEMs, or original equipment manufacturers). This part of the business also covers all of Microsoft's gaming business, including the sale of Xbox consoles, subscriptions to services like Game Pass, and revenue from games themselves. Finally, it includes advertising revenue from Bing search and the sale of Microsoft's own hardware devices like the Surface line of tablets and laptops.
What management is betting on now
Microsoft's biggest bet is on artificial intelligence (AI), integrating it into nearly every product and service it offers, from its Azure cloud platform to its Microsoft 365 productivity suite with features called Copilot. The company is investing heavily in building out its global data centers to power these AI services. Another major focus is expanding its gaming footprint, especially through its acquisition of Activision Blizzard, to grow its Xbox Game Pass subscription service. Finally, security is a top priority, with the company dedicating significant resources to making its platforms and products more secure for its customers.
Price history
How the share price has moved
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Earnings history
Last 8 quarters — what happened
Click any quarter to read the call summary and what the numbers say.
FY2024 Q4
$23.32B
FY2025 Q1
$19.26B
FY2025 Q2
$6.49B
FY2025 Q3
$20.30B
FY2025 Q4
$25.57B
FY2026 Q1
$25.66B
FY2026 Q2
$5.88B
FY2026 Q3
$15.80B
Revenue
$82.89B
Net income
$31.78B
Diluted EPS
4.27
Operating cash flow
$46.68B
Free cash flow
$15.80B
Fetching…
Sources
Revenue
$81.27B
Net income
$38.46B
Diluted EPS
5.16
Operating cash flow
$35.76B
Free cash flow
$5.88B
Fetching…
Sources
Revenue
$77.67B
Net income
$27.75B
Diluted EPS
3.72
Operating cash flow
$45.06B
Free cash flow
$25.66B
Fetching…
Sources
Revenue
$76.44B
Net income
$27.23B
Diluted EPS
3.65
Operating cash flow
$42.65B
Free cash flow
$25.57B
Fetching…
Sources
Revenue
$70.07B
Net income
$25.82B
Diluted EPS
3.46
Operating cash flow
$37.04B
Free cash flow
$20.30B
Fetching…
Sources
Revenue
$69.63B
Net income
$24.11B
Diluted EPS
3.23
Operating cash flow
$22.29B
Free cash flow
$6.49B
Fetching…
Sources
Revenue
$65.58B
Net income
$24.67B
Diluted EPS
3.30
Operating cash flow
$34.18B
Free cash flow
$19.26B
Fetching…
Sources
Revenue
$64.73B
Net income
$22.04B
Diluted EPS
2.94
Operating cash flow
$37.20B
Free cash flow
$23.32B
Fetching…
Sources
Is it cheap or expensive?
Fair value $253.51 vs current price $390.34
Wall Street consensus is the average analyst price target: $556.75 (119.6% higher than our fair-value estimate).
Our most-likely fair value is $253.51 a share — about 35.1% below today's price of $390.34, so the stock currently looks expensive (overvalued).
Is it drowning in debt?
Healthy
Net debt $47.2B. Interest coverage 53.9x.
Net debt
$47.20B
Interest coverage
53.89x
Microsoft Corporation's profit covers its interest bill about 53.9 times over. which is stronger than most peers shown here.
Healthy
Worse cushion
Baseline
Better cushion
MSFT
BASELINE
Microsoft Corporation
Total debt $125.43B Interest coverage 53.89x This is the baseline the peer rows are being compared against.
Total debt $95.88B Interest coverage 175.32x +225% vs MSFT Carries about 3.3x more debt cushion than MSFT.
Total debt $235.54B Interest coverage 35.17x -35% vs MSFT Carries about 1.5x less debt cushion than MSFT.
Total debt $167.43B Interest coverage 4.88x -91% vs MSFT Carries about 11.0x less debt cushion than MSFT.
Total debt $7.08B Interest coverage 33.10x -39% vs MSFT Carries about 1.6x less debt cushion than MSFT.
What you should know
The case for and against MSFT
3 Rewards
1 Risk
Rewards
-
Revenue grew 13.0% last year.
-
Returns 34.0% on equity, ahead of 33% of its peers.
-
Free cash flow was positive in 10/10 years.
Risks
-
Insider ownership is only 0.1% (peer median: 3.0%).
The numbers
All the key metrics, grouped by purpose
Tap any ? icon to learn what it means.
Valuation
How expensive the stock looks
P/E (TTM)
23.70x
Forward P/E
20.14x
P/B
7.00x
P/S
9.11x
EV/EBITDA
15.98x
PEG ratio
1.23x
Profitability
How much profit each dollar creates
Gross margin
68.3%
Operating margin
46.3%
Net margin
39.3%
ROE
34.0%
ROA
14.8%
Health
Liquidity and balance-sheet strength
Debt / equity
0.30x
Current ratio
1.28x
Quick ratio
1.14x
Total debt
$125.43B
Total cash
$78.23B
Growth
How the business has been compounding
Revenue TTM
$318.27B
Revenue 5Y CAGR
13.8%
EPS TTM
16.47
EPS 5Y CAGR
12.2%
Cash flow
How much cash the business throws off
Operating CF TTM
$170.14B
Free CF TTM
$71.61B
FCF margin
22.5%
Dividend
Shareholder payout
Yield
0.9%
Payout ratio
20.7%
Last ex-div date
2026-08-20