Microsoft Corporation
Software and cloud company selling Azure compute and AI services, Office, Teams, LinkedIn and Dynamics subscriptions, Windows licences, Xbox content and Bing advertising.
- Rating
- Price
- $529.05
- Price target
- $530.00
- Implied return
- +0%
- Market value
- $3,930bn
- Next results
- Not on the calendar
Our view
Vishal Bhargava, CFA · updated Oct 19, 2026Azure is supply-constrained, not demand-constrained: growth re-accelerated to 43% as capacity arrived, and $203bn of the $678bn commercial RPO converts within twelve months3 (source: Microsoft 8-K quarterly earnings releases, FY26 Q1 to Q4). The cost is capex: total additions reach $176bn in FY27, holding free cash flow at $68bn before it more than doubles to $148bn by FY30. We agree with the bulls on demand, capex returns and Copilot, but at 58x FY27 free cash flow the price already pays for the recovery we forecast. We are paid nothing for being right.
What could prove us wrong
- Cash capex five points of revenue above plan would take the DCF to $453, $81 a share lower.
- A gross margin 394bp below our forecast, as depreciation arrives, would take the DCF to $470, $64 a share lower.
- OpenAI insourcing capacity would put $12bn of FY28 revenue at risk in one counterparty, $25 a share lower.
Ask the analyst about MSFT
Answers come from Penmark’s MSFT research and the company’s filings, with a source for each claim. Change an assumption and the assistant reruns the report’s valuation.