Signal Ledger LabSignal Ledger valuation · MSFT
Microsoft Corp
What the shares are worth today on our research (management’s own targets for each business): every line valued at the end of FY2030, net debt rolled forward, then discounted back to Jun 30, 2026.
- Business value at FY2030
- $4,324B
- FY2030 revenue
- $617B
- FY2030 EPS · P/E
- $31.97 · 19×
- Discount rate (WACC · equity)
- 9.10% · 9.21%
Latest quarter in this research: Q4 FY2026
Reported Jul 29, 2026 for the quarter to Jun 30, 2026 (company release ↗). This valuation already reflects these results (researched Oct 23, 2026).
| Segment | Revenue | vs a year ago | Operating income | Margin |
|---|---|---|---|---|
| Agents and Infra | $74.6B | +23% | $36.7B | 49.3% |
| Devices and Consumer | $15.4B | −1% | $3.87B | 25.1% |
- FY2026 Q4 results, with historical segment presentation recast in September to Agents and Infra / Devices and Consumer. CY2026 175B capex is not FY2027 guidance.
What each business is worth
| Business | Model | FY2030 revenue | Value today | Per share | 2030 multiple | Value from beyond FY2030 |
|---|---|---|---|---|---|---|
| AzureAgents and Infra · Azure, Microsoft 365 and enterprise software | Capacity (capex follows demand) | $295B | $1,137B | $153.08 | 7.6× EBITDA | 88% |
| Microsoft 365 cloudAgents and Infra · Azure, Microsoft 365 and enterprise software | Margin | $172B | $1,432B | $192.80 | 15.5× EBIT | 67% |
| Productivity and server licensingAgents and Infra · Azure, Microsoft 365 and enterprise software | Margin | $46B | $274B | $36.90 | 12.3× EBIT | 61% |
| Industry solutionsAgents and Infra · Azure, Microsoft 365 and enterprise software | Margin | $30B | $251B | $33.84 | 15.4× EBIT | 66% |
| Frontier and support servicesAgents and Infra · Azure, Microsoft 365 and enterprise software | Margin | $11B | $52B | $7.06 | 12.4× EBIT | 61% |
| Search and advertisingDevices and Consumer · Windows, Xbox and advertising | Margin | $39B | $166B | $22.38 | 15.2× EBIT | 67% |
| XBOXDevices and Consumer · Windows, Xbox and advertising | Margin | $16B | $31B | $4.11 | 5.1× EBIT | 34% |
| Windows OEM and devicesDevices and Consumer · Windows, Xbox and advertising | Margin | $7.7B | $13B | $1.80 | 3.4× EBIT | 22% |
| All businesses | $617B | $3,356B | $451.98 |
Azure: does new capacity pay?
Each $1 of equipment earns 28.6% EBITDA a year against a 21.4% break-even. Every $1 of new annual revenue is worth $0.78 today after paying for its equipment.
Needs $111B of funding before it pays for itself; that lands in net debt.
From 2030 back to today
- Enterprise value at end of FY2030$4,324B
- Plus net cash at FY2030$245B
- Equity value at FY2030$4,569B
- ÷ (1 + 9.21%)^4.0 years at the cost of equity$3,212B
- + dividends paid on the way, discounted$91B
This reconciliation checks the published Signal Ledger valuation against the net-debt path. The difference is 0.7%, inside our 5% tolerance.
From businesses to one share
- All businesses, valued today$3,356B
- − borrowings$40B
- − finance leases$67B
- + cash and short-term investments$77B
- ÷ diluted shares7.426B
- Signal Ledger valuation$447.93
Year by year to FY2030
| Fiscal year | Revenue | EBITDA | Capex | Free cash flow | Net debt at year end |
|---|---|---|---|---|---|
| FY2027 | $395B | $233B | $174B | $23B | $35B |
| FY2028 | $465B | $287B | $170B | $75B | $12B cash |
| FY2029 | $539B | $346B | $180B | $116B | $101B cash |
| FY2030 | $617B | $409B | $183B | $168B | $245B cash |
What must be true
- Agents and Infra · Azure, Microsoft 365 and enterprise software grows revenue from $332.6B in FY2027 to $553.8B in FY2030 (1.7×).
- Devices and Consumer · Windows, Xbox and advertising holds revenue roughly flat, from $62.1B in FY2027 to $63.1B in FY2030.
- Azure raises its EBITDA margin from 73.2% to 77.2%.
- Microsoft 365 cloud raises its EBIT margin from 59.8% to 63.8%.
- Productivity and server licensing raises its EBIT margin from 50.6% to 54.6%.
- Industry solutions raises its EBIT margin from 59.8% to 63.8%.
- Frontier and support services raises its EBIT margin from 41.2% to 45.2%.
- Search and advertising raises its EBIT margin from 29.6% to 33.6%.
- XBOX holds its EBIT margin at 29.6%.
- Windows OEM and devices holds its EBIT margin at 29.6%.
- The company spends $706.9B of capital expenditure through FY2030.
- Net debt peaks at $34.7B in FY2027 and stays financeable.
- Azure earns 28.6% EBITDA a year on each dollar of equipment, above the 21.4% it needs to cover depreciation and the cost of capital.
What the price implies
To reach $521.08 at our discount rate, Microsoft Corp would need about $728.8B of FY2030 sales (growth of about 21.7% a year from FY2026) with 55.6% GAAP EBIT margin on margin-based lines and 77.2% EBITDA margin on capacity lines — versus $616.8B and 55.6% GAAP EBIT margin on margin-based lines and 77.2% EBITDA margin on capacity lines in our research.
At the research price of $521.08 (2026-10-23), the price asks more than our assumptions overall. These are operating requirements at that price, not additional valuations or forecasts.
If sales and margins changed together
Each row matches the same research price at our unchanged discount rate, by scaling every operating line's margin by one common factor. Sales cover margin and capacity lines only; other valuation lines stay fixed. Margins are revenue-weighted within each metric, before separately modeled corporate costs and eliminations. The conclusion uses the row at our research margins when sales alone can match the price, otherwise the solved row needing the least sales growth; this is a trade-off between growth and profitability, not a forecast.
| FY2030 sales factor | FY2030 sales | FY2026–30 CAGR | Required FY2030 margin | Requirement |
|---|---|---|---|---|
| 1.18×At research margins | $728.8B | 21.7% | 55.6% GAAP EBIT 77.2% EBITDA | Within margin guardrails |
| 1.50× | $925.2B | 29.2% | 49.3% GAAP EBIT 68.4% EBITDA | Within margin guardrails |
| 2.00× | $1,233.6B | 38.9% | 43.3% GAAP EBIT 60.1% EBITDA | Within margin guardrails |
| 3.00× | $1,850.5B | 53.7% | 37.2% GAAP EBIT 51.6% EBITDA | Within margin guardrails |
CAGR uses $331.8B of same-scope FY2026 sales from the published model or its sourced research base, over four fiscal years. “Within margin guardrails” checks numeric limits only, not commercial plausibility. Each line and year must stay at or below 50.0% GAAP EBIT and 100% EBITDA, or our research margin where that is higher; capacity EBIT uses the engine's equipment depreciation. Unsolved margins are not extrapolated.
- Implied discount rate
- 8.3%
- All-business FY2030 sales factor
- 1.18×
The WACC that makes model value equal the price, shifting WACC and cost of equity by the same amount. Model: 9.1% WACC · 9.2% cost of equity.
FY2030 revenue would need to reach $728.8B (model: $616.8B) across the margin and capacity businesses. FY1 stays fixed; the sales change ramps to FY2030 and stays at that factor thereafter.
If only one business changed
Businesses with margin or capacity revenue paths, ordered by value today. Revenue and margin are separate alternatives; these requirements are not added together.
Agents and Infra · Azure, Microsoft 365 and enterprise software
- Revenue alone
- FY2030 revenue would need to reach $654.5B (model: $553.8B).
- Margin alone
FY2030 EBIT margin would need to reach 67.4% (model: 61.4%).
FY2030 EBITDA margin would need to reach 84.8% (model: 77.2%).
Devices and Consumer · Windows, Xbox and advertising
- Revenue alone
- FY2030 revenue would need to reach $236.7B (model: $63.1B).
- Margin alone
FY2030 EBIT margin would need to reach 107.7% (model: 32.1%).
Mechanical requirements, not forecasts. The separate sales-only and single-business factors are searched from 0.1× to 6×; an unsolved comparison means this business alone cannot get there within those bounds. Single-business revenue changes apply from FY2 onward; margin changes scale the full EBIT or EBITDA margin path. Mixed groups show revenue-weighted EBIT and EBITDA margins separately. Requirements above 100% are not feasible margins. Joint rows instead search non-negative uniform margin factors only up to the EBIT/EBITDA guardrails; the entire margin path scales, including post-FY2030 convergence. Sales and margins change together only in that table. The rate search runs from the largest terminal growth rate plus 0.5 percentage points to 30% WACC.
The discount rate
- Cost of equity
- 9.21%
- WACC
- 9.10%
- 10-year Treasury · model / spot
- 3.87% · 5.13%
r_f 3.87% (5-year average 10-year Treasury yield 3.87% (spot 5.13% on 2026-10-21)) + β 1.07 after Blume adjustment × 5%, rounded to 0.01% (1bp)
methodology §4.5: market-weighted WACC + 0.060661 point build-out premium: 1pp × clamp(FY1 net debt increase / (2% × equity market value), 0, 1), not rounded
The model uses the recorded 5-year average Treasury yield. The spot yield is shown for context.
Every input, with its source
Show 50 inputs · reported, guidance and rule-based
| Input | Value | Basis | Why |
|---|---|---|---|
| Revenue FY2027Azure | $143.1B | Reported | fade high growth (methodology §4.2), growth 40.4% sec.gov ↗ |
| Revenue FY2030Azure | $294.9B | Reported | fade high growth (methodology §4.2), growth 22.1% sec.gov ↗ |
| EBITDA margin FY2030Azure | 77.2% | Rule | linear path to 77.2% by FY2030 (§4.3 E2: 4.0000 points = 4pp × clamp((CAGR − 1.5%) / 2%, 0, 1); revenue CAGR 30.4% to FY2030; no cited expansion evidence) Valuation methodology §4.3 (current E2) · Read methodology ↗ |
| Equipment per $1 of revenue (k)Azure | 2.7 | Rule | methodology §4.4: in-service equipment + FY1 capex over FY2 revenue = 2.70 microsoft.com ↗ |
| Equipment lifeAzure | 7 years | Reported | server life 6 years + 1 for long-lived assets sec.gov ↗ |
| Capex FY2027Azure | $166.3B | Rule | Retain the existing 175B FY1 proxy while disclosing its mismatch: the official July call gives approximately 175B for calendar 2026 after finance-to-operating-lease reclassification, not FY2027. FY2027 capex is guided only to grow YoY; Q1 >50B. A fiscal-year replacement needs user judgment, quantified in the report. Server life remains 6 years; 15→25 years refers to buildings, not servers. × 0.95 pool share microsoft.com ↗ |
| Terminal growthAzure | 3.0% | Rule | methodology §4.2 terminal growth for a growth line Valuation methodology §4.2 · Read methodology ↗ |
| Revenue FY2027Microsoft 365 cloud | $118.9B | Reported | fade high growth (methodology §4.2), growth 18.6% sec.gov ↗ |
| Revenue FY2030Microsoft 365 cloud | $172.0B | Reported | fade high growth (methodology §4.2), growth 11.0% sec.gov ↗ |
| EBIT margin FY2030Microsoft 365 cloud | 63.8% | Rule | linear path to 63.8% by FY2030 (§4.3 E2: 4.0000 points = 4pp × clamp((CAGR − 1.5%) / 2%, 0, 1); revenue CAGR 14.4% to FY2030; no cited expansion evidence) Valuation methodology §4.3 (current E2) · Read methodology ↗ |
| Maintenance capexMicrosoft 365 cloud | 3.1% | Rule | Residual 5% of FY26 cash PP&E 115.948B plus finance lease additions 24.608B / same non-Azure revenue. Complements the 95% infrastructure pool, instead of unrelated 2% defaults; same historical year, allocation is not a disclosed subline capex amount. sec.gov ↗ |
| Terminal growthMicrosoft 365 cloud | 3.0% | Rule | methodology §4.2 terminal growth for a growth line Valuation methodology §4.2 · Read methodology ↗ |
| Revenue FY2027Productivity and server licensing | $39.3B | Reported | hold moderate (methodology §4.2), growth 5.3% sec.gov ↗ |
| Revenue FY2030Productivity and server licensing | $45.9B | Reported | hold moderate (methodology §4.2), growth 5.3% sec.gov ↗ |
| EBIT margin FY2030Productivity and server licensing | 54.6% | Rule | linear path to 54.6% by FY2030 (§4.3 E2: 4.0000 points = 4pp × clamp((CAGR − 1.5%) / 2%, 0, 1); revenue CAGR 5.4% to FY2030; no cited expansion evidence) Valuation methodology §4.3 (current E2) · Read methodology ↗ |
| Maintenance capexProductivity and server licensing | 3.1% | Rule | Residual 5% of FY26 cash PP&E 115.948B plus finance lease additions 24.608B / same non-Azure revenue. Complements the 95% infrastructure pool, instead of unrelated 2% defaults; same historical year, allocation is not a disclosed subline capex amount. sec.gov ↗ |
| Terminal growthProductivity and server licensing | 2.0% | Rule | methodology §4.2 terminal growth for a mature line Valuation methodology §4.2 · Read methodology ↗ |
| Revenue FY2027Industry solutions | $22.5B | Reported | hold moderate (methodology §4.2), growth 10.5% sec.gov ↗ |
| Revenue FY2030Industry solutions | $30.3B | Reported | hold moderate (methodology §4.2), growth 10.5% sec.gov ↗ |
| EBIT margin FY2030Industry solutions | 63.8% | Rule | linear path to 63.8% by FY2030 (§4.3 E2: 4.0000 points = 4pp × clamp((CAGR − 1.5%) / 2%, 0, 1); revenue CAGR 10.5% to FY2030; no cited expansion evidence) Valuation methodology §4.3 (current E2) · Read methodology ↗ |
| Maintenance capexIndustry solutions | 3.1% | Rule | Residual 5% of FY26 cash PP&E 115.948B plus finance lease additions 24.608B / same non-Azure revenue. Complements the 95% infrastructure pool, instead of unrelated 2% defaults; same historical year, allocation is not a disclosed subline capex amount. sec.gov ↗ |
| Terminal growthIndustry solutions | 3.0% | Rule | methodology §4.2 terminal growth for a growth line Valuation methodology §4.2 · Read methodology ↗ |
| Revenue FY2027Frontier and support services | $8.8B | Reported | hold moderate (methodology §4.2), growth 6.4% sec.gov ↗ |
| Revenue FY2030Frontier and support services | $10.6B | Reported | hold moderate (methodology §4.2), growth 6.4% sec.gov ↗ |
| EBIT margin FY2030Frontier and support services | 45.2% | Rule | linear path to 45.2% by FY2030 (§4.3 E2: 4.0000 points = 4pp × clamp((CAGR − 1.5%) / 2%, 0, 1); revenue CAGR 6.4% to FY2030; no cited expansion evidence) Valuation methodology §4.3 (current E2) · Read methodology ↗ |
| Maintenance capexFrontier and support services | 3.1% | Rule | Residual 5% of FY26 cash PP&E 115.948B plus finance lease additions 24.608B / same non-Azure revenue. Complements the 95% infrastructure pool, instead of unrelated 2% defaults; same historical year, allocation is not a disclosed subline capex amount. sec.gov ↗ |
| Terminal growthFrontier and support services | 2.0% | Rule | methodology §4.2 terminal growth for a mature line Valuation methodology §4.2 · Read methodology ↗ |
| Revenue FY2027Search and advertising | $27.8B | Reported | hold moderate (methodology §4.2), growth 12.0% sec.gov ↗ |
| Revenue FY2030Search and advertising | $39.1B | Reported | hold moderate (methodology §4.2), growth 12.0% sec.gov ↗ |
| EBIT margin FY2030Search and advertising | 33.6% | Rule | linear path to 33.6% by FY2030 (§4.3 E2: 4.0000 points = 4pp × clamp((CAGR − 1.5%) / 2%, 0, 1); revenue CAGR 12.0% to FY2030; no cited expansion evidence) Valuation methodology §4.3 (current E2) · Read methodology ↗ |
| Maintenance capexSearch and advertising | 3.1% | Rule | Residual 5% of FY26 cash PP&E 115.948B plus finance lease additions 24.608B / same non-Azure revenue. Complements the 95% infrastructure pool, instead of unrelated 2% defaults; same historical year, allocation is not a disclosed subline capex amount. sec.gov ↗ |
| Terminal growthSearch and advertising | 3.0% | Rule | methodology §4.2 terminal growth for a growth line Valuation methodology §4.2 · Read methodology ↗ |
| Revenue FY2027XBOX | $20.2B | Reported | hold decline (methodology §4.2), growth -7.1% sec.gov ↗ |
| Revenue FY2030XBOX | $16.2B | Reported | hold decline (methodology §4.2), growth -7.1% sec.gov ↗ |
| EBIT margin FY2030XBOX | 29.6% | Rule | linear path to 29.6% by FY2030 (declining line without a management target holds its latest margin) Valuation methodology §4.3 (current E2) · Read methodology ↗ |
| Maintenance capexXBOX | 3.1% | Rule | Residual 5% of FY26 cash PP&E 115.948B plus finance lease additions 24.608B / same non-Azure revenue. Complements the 95% infrastructure pool, instead of unrelated 2% defaults; same historical year, allocation is not a disclosed subline capex amount. sec.gov ↗ |
| Terminal growthXBOX | -3.0% | Rule | methodology §4.2 terminal growth for a declining line Valuation methodology §4.2 · Read methodology ↗ |
| Revenue FY2027Windows OEM and devices | $14.0B | Guidance | hold decline (methodology §4.2), growth -18.0% microsoft.com ↗ |
| Revenue FY2030Windows OEM and devices | $7.7B | Guidance | hold decline (methodology §4.2), growth -18.0% microsoft.com ↗ |
| EBIT margin FY2030Windows OEM and devices | 29.6% | Rule | linear path to 29.6% by FY2030 (declining line without a management target holds its latest margin) Valuation methodology §4.3 (current E2) · Read methodology ↗ |
| Maintenance capexWindows OEM and devices | 3.1% | Rule | Residual 5% of FY26 cash PP&E 115.948B plus finance lease additions 24.608B / same non-Azure revenue. Complements the 95% infrastructure pool, instead of unrelated 2% defaults; same historical year, allocation is not a disclosed subline capex amount. sec.gov ↗ |
| Terminal growthWindows OEM and devices | -3.0% | Rule | methodology §4.2 terminal growth for a declining line Valuation methodology §4.2 · Read methodology ↗ |
| WACCDiscount rates | 9.10% | Rule | methodology §4.5: market-weighted WACC + 0.060661 point build-out premium: 1pp × clamp(FY1 net debt increase / (2% × equity market value), 0, 1), not rounded FRED DGS10 2021-10-20..2026-10-21 |
| Cost of equityDiscount rates | 9.21% | Rule | r_f 3.87% (5-year average 10-year Treasury yield 3.87% (spot 5.13% on 2026-10-21)) + β 1.07 after Blume adjustment × 5%, rounded to 0.01% (1bp) 60 monthly returns vs SPY, 2021-09..2026-09 (adjusted closes) |
| Tax rateDiscount rates | 20.0% | Guidance | Management guided to an approximately 20% FY27 effective tax rate. microsoft.com ↗ |
| Cash and short-term investmentsBalance sheet | $76.8B | Reported | cash, cash equivalents and short-term investments; use consolidated short-term investment total once, including all security classes sec.gov ↗ |
| BorrowingsBalance sheet | $40.3B | Reported | borrowings due within a year plus long-term borrowings us-gaap:LongTermDebtCurrent · 0001193125-26-323660 + us-gaap:LongTermDebtNoncurrent · 0001193125-26-323660 |
| Finance leasesBalance sheet | $66.6B | Reported | finance lease liabilities (capex-like; deducted once) us-gaap:FinanceLeaseLiability · 0001193125-26-323660 (filed 2026-07-29) |
| SharesBalance sheet | 7.426B | Reported | shares outstanding as of 2026-07-23 cover page of 10-K 0001193125-26-323660 |
| Dividends per yearShareholders | $27.0B | Reported | Last four quarters of dividends per share supplied in the evidence. × 7.426B shares companyAnnual fiscalYearEnd 2026-06-30 |
Research notes
- share-count comparison: 7.453B FY 2026-06-30 diluted average; point-in-time denominator retained
- cost of equity 9.21% (β 1.07 after Blume adjustment), WACC 9.1% incl. 0.060661-point build-out premium (§4.5 G2)
- Azure: k 2.7 (calibrated 2.70), life 7 years
- §4.5 G2: FY1 net debt increase $4.694309853863317B / (2% × equity market value $3869.3032444502805B); build-out premium 0.060661pp, measured before premium
Signal Ledger research under one stated scenario — management's targets are delivered — not a forecast that they will be and not investment advice. The research desk (gpt-5.6-luna) gathers filings, guidance and targets; deterministic code applies the samepublished rules to every company and checks the result. Inputs may contain errors; follow the source links before relying on them. Read our valuation methodology →