As of June 7, 2025, Microsoft Corp has a Discounted Cash Flow (DCF) derived fair value of $360.22 per share. With the current market price at $470.38, this represents a potential upside of -23.4%.
| Key Metrics | Value |
|---|---|
| DCF Fair Value (5-year) | $285.68 |
| DCF Fair Value (10-year) | $360.22 |
| Potential Upside (5-year) | -39.3% |
| Potential Upside (10-year) | -23.4% |
| Discount Rate (WACC) | 7.7% - 10.7% |
Revenue is projected to grow from $245122 million in 06-2024 to $557206 million by 06-2034, representing a compound annual growth rate of approximately 8.6%.
| Fiscal Year | Revenue (USD millions) | Growth |
|---|---|---|
| 06-2024 | 245122 | 16% |
| 06-2025 | 272123 | 11% |
| 06-2026 | 288748 | 6% |
| 06-2027 | 302853 | 5% |
| 06-2028 | 330019 | 9% |
| 06-2029 | 361187 | 9% |
| 06-2030 | 393764 | 9% |
| 06-2031 | 430842 | 9% |
| 06-2032 | 473079 | 10% |
| 06-2033 | 510600 | 8% |
| 06-2034 | 557206 | 9% |
Net profit margin is expected to improve from 36% in 06-2024 to 43% by 06-2034, driven by operational efficiency and economies of scale.
| Fiscal Year | Net Profit (USD millions) | Profit Margin |
|---|---|---|
| 06-2024 | 88136 | 36% |
| 06-2025 | 103342 | 38% |
| 06-2026 | 113118 | 39% |
| 06-2027 | 122093 | 40% |
| 06-2028 | 136617 | 41% |
| 06-2029 | 153232 | 42% |
| 06-2030 | 167822 | 43% |
| 06-2031 | 184458 | 43% |
| 06-2032 | 203447 | 43% |
| 06-2033 | 220551 | 43% |
| 06-2034 | 241727 | 43% |
with a 5-year average of $26507 million. Projected CapEx is expected to maintain at approximately 13% of revenue.
Depreciation is based on an average useful life of 5 years for capital assets.
| Fiscal Year | D&A (USD millions) |
|---|---|
| 06-2025 | 30659 |
| 06-2026 | 34218 |
| 06-2027 | 37499 |
| 06-2028 | 40659 |
| 06-2029 | 41374 |
| 06-2030 | 44611 |
Net working capital is expected to increase gradually, with projected changes affecting free cash flow.
| Components | Average Days |
|---|---|
| Days Receivables | 83 |
| Days Inventory | 14 |
| Days Payables | 106 |
| Fiscal Year | EBITDA | Tax | CapEx | Change in NWC | FCF |
|---|---|---|---|---|---|
| 3M/2025 | 38642 | 5108 | 9051 | 1543 | 22940 |
| 2026 | 169843 | 22365 | 38415 | 3876 | 105187 |
| 2027 | 183882 | 24140 | 40292 | 2835 | 116615 |
| 2028 | 204449 | 27011 | 43906 | 5759 | 127773 |
| 2029 | 225081 | 30296 | 48053 | 6343 | 140389 |
| Valuation Method | Fair Price (USD) | Potential Upside |
|---|---|---|
| 5-Year DCF (Growth) | 285.68 | -39.3% |
| 10-Year DCF (Growth) | 360.22 | -23.4% |
| 5-Year DCF (EBITDA) | 479.76 | 2.0% |
| 10-Year DCF (EBITDA) | 556.78 | 18.4% |
Is Microsoft Corp (MSFT) a buy or a sell? Microsoft Corp is definitely a sell. Based on our DCF analysis, Microsoft Corp (MSFT) appears to be overvalued with upside potential of -23.4%. The company's strong projected growth in revenue and profitability, coupled with consistent capital expenditure, supports our positive outlook on its intrinsic value.
Key investment drivers include:
Investors should consider reducing exposure at the current market price of $470.38.