MSFT — Microsoft Corp
Snapshot dated September 30, 2026.
Microsoft Corporation operates as a global technology company organized into three primary business segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. The company generates revenue through a diverse mix of software licenses, subscription services like Microsoft 365, enterprise cloud computing solutions via the Azure platform, and hardware products including the Surface line and Xbox consoles. Serving millions of enterprise and individual customers, Microsoft maintains a significant global footprint with operations in over 190 countries and a workforce of more than 200,000 employees. It holds a dominant position in the enterprise software and cloud infrastructure markets, frequently competing with other major tech entities such as Amazon, Alphabet, and Oracle. A recent strategic focus for the company has been the integration of generative artificial intelligence across its entire software suite, branded as Copilot, aiming to enhance productivity features within its existing operating systems and productivity applications.
Fair Value / Share
$220.93
Price on September 30, 2026
$508.15
Upside to fair value
-56.52%
Data by Equibles and SEC filings. Figures are as of September 30, 2026 and are not live.
Earnings Yield
Earnings Yield shows how much profit a company generates relative to its share price. EPS ÷ Stock Price.
Stock Price
$508.15
Market Cap
$3,787,241,950,000
Net Income (TTM)
$133,749,000,000
Diluted Shares
7.45 billion
EPS (TTM)
$17.95
Earnings Yield
3.53%
AI Analysis
Based on a share price of $508.15 and an EPS of $17.95, Microsoft Corporation currently demonstrates an earnings yield of 3.53%. This yield sits below the 4-5% range typically available from safe, guaranteed alternatives like bonds. Mechanically, this indicates that the current share price attributes a higher cost to each dollar of existing earnings compared to these safe alternatives, which implies that the market is incorporating expectations for future earnings growth into the current stock price. For this yield to rise, either the earnings per share would need to increase, or the share price would need to decrease. This measure does not account for the company's debt obligations, future capital expenditure requirements, or the volatility inherent in technology sector cash flows.
Return on Capital
EBIT ÷ (Net Working Capital + Net Fixed Assets) — how efficiently the business turns capital into profit.
EBIT (TTM)
$155,237,000,000
Net Working Capital
$27,177,000,000
Net Fixed Assets
$313,076,000,000
Invested Capital
$340,253,000,000
Return on Capital
45.62%
AI Analysis
Microsoft Corp generated an EBIT (TTM) of $155.2B against $340.3B of invested capital, which is derived from $27.2B in net working capital and $313.1B in net fixed assets. This results in a return on capital of 45.62%. This figure sits above the 30% benchmark used by this framework to identify efficient use of capital, indicating the business generates significant profit relative to the tangible capital required for its operations. This measurement focuses on tangible operating capital and does not capture the value of intangible assets like intellectual property or brand equity, which may be significant in software-driven models. Furthermore, because capital intensity varies by industry, an early-growth business reinvesting heavily in new infrastructure might naturally show a lower figure, as this framework reflects current operating efficiency rather than future growth capacity.
Acquirer's Multiple
Enterprise Value ÷ Operating Earnings — how many years of operating earnings it would take to buy the whole business.
| Company | Operating earnings | Enterprise value | Multiple |
|---|---|---|---|
| ORCLOracle Corp | $23.1B | $388.5B | 16.8x |
| MSFTMicrosoft Corp | $155.2B | $3.8T | 24.5x |
| GOOGLAlphabet Inc. | $147.6B | $4.3T | 28.9x |
Where MSFT sits: 24.5x against a peer median of 22.9x (peers: 28.9x and 16.8x) — in line with the median, within 7.1%.
Show the enterprise value bridge for each companyHide the enterprise value bridge
MSFT
Debt $40.3B. This is the company's reported total debt — borrowings due within a year plus long-term borrowings. The company separately reports $16.5B of operating lease liabilities as of 2026-06-30. These are excluded from debt because operating lease cost already sits inside operating earnings — counting the liability again as debt would charge the business twice for the same thing.
GOOGL
Named as a competitor: Competes in enterprise cloud infrastructure and productivity software via Google Cloud and Workspace
Debt $100.6B. This is reported total debt, including $2.6B of finance lease obligations ($449M + $2.1B in the filing). Finance leases are counted as debt because they are a borrowing in substance — the company has committed to fixed payments for an asset it effectively owns.
ORCL
Named as a competitor: Competes in enterprise database software, business applications, and cloud infrastructure
Debt $8.4B. This is reported total debt, including $9.2B of finance lease obligations ($749M + $8.4B in the filing). Finance leases are counted as debt because they are a borrowing in substance — the company has committed to fixed payments for an asset it effectively owns.
Operating earnings — MSFT
AI Analysis
Microsoft (MSFT) features an enterprise value of $3.8T and operating earnings of $155.2B, producing an Acquirer's Multiple of 24.5x. Its competitors include Alphabet (GOOGL), which has an enterprise value of $4.3T and operating earnings of $147.6B, resulting in a 28.9x multiple, and Oracle (ORCL), which has an enterprise value of $388.5B and operating earnings of $23.1B, resulting in a 16.8x multiple. Among this group, Alphabet possesses the highest multiple, while Oracle maintains the lowest. MSFT currently measures 24.5x against a peer median of 22.9x (peers: 28.9x and 16.8x) — in line with the median, within 7.1%. This comparison would shift if the companies’ operating profit margins relative to their enterprise scale changed or if one firm significantly altered its debt-to-equity leverage. The Acquirer’s Multiple captures operating profitability regardless of financing structure, but does not account for future growth trajectories or tax burdens.
FS-Score
A 10-check read on financial health, across profitability, balance-sheet stability and operating momentum.
FS-Score
6/10
Decent score — worth a deeper look before investing.
Section 1
Current Profitability
3/3
Microsoft demonstrates Strong current profitability, successfully clearing all three hurdles for cash generation and earnings quality.
- Return on Assets is positive at 17.64%
- Free Cash Flow to Total Assets is positive at 8.83%
- Accruals check passed with cash flow from operations 1.37 times higher than net income
This score indicates that current operations are generating cash-backed profits, though a significant drop in cash flow relative to assets would weaken this result.
Return on Assets (ROA > 0)
PassFree Cash Flow to Total Assets (FCFTA > 0)
PassAccruals (CFO / Net Income > 1)
PassSection 2
Stability
2/3
The stability profile is Mixed, as improving leverage and a reduction in share count were offset by a decline in the current ratio.
- Long-term debt to assets decreased from 0.06 to 0.04
- Liquidity declined as the current ratio moved from 1.35 to 1.23
- Net dilution was avoided as annual diluted weighted-average shares fell from 7.46 billion to 7.45 billion shares
The score reflects a healthier debt profile and share count, but further tightening of the current ratio would signal a further decline in short-term flexibility.
Change in Leverage (↓ or unchanged)
PassChange in Liquidity (↑ Current Ratio)
FailNet Dilution (annual diluted weighted-average shares, this year vs last)
PassSection 3
Recent Operational Improvements
1/4
Recent operational trends are Weak, with the company failing to improve on three out of four efficiency and margin benchmarks over the last year.
- Return on Assets improved from 16.45% to 17.64%
- Free Cash Flow to Total Assets declined from 11.57% to 8.83%
- Gross Margin contracted from 68.82% to 67.94%
- Asset Turnover slowed from 0.46 to 0.44
While asset returns improved, the score would only rise if the company reversed the current downward trends in margins and asset efficiency.
Change in ROA (↑)
PassChange in FCFTA (↑)
FailChange in Gross Margin (↑)
FailChange in Asset Turnover (↑)
FailFramework conclusion
Microsoft earns a total FS-Score of 6/10, driven by high current profitability but held back by softening operational trends and liquidity. This mid-range score suggests that while the company remains fundamentally profitable, there are signs of recent efficiency declines rather than a purely clean bill of health. The score identifies specific areas of operational friction, such as margin contraction and lower asset turnover, which must be weighed against its successful debt reduction and cash-backed earnings.
- Accruals value of 1.37 indicates that accounting earnings are well-supported by cash flow from operations
- Current ratio decreased from 1.35 to 1.23, indicating a year-over-year decline in liquidity
- Gross Margin fell to 67.94%, signaling a slight reduction in pricing power or cost efficiency
- Asset Turnover drifted lower to 0.44, showing the business generated less revenue per dollar of assets than the prior year
Intrinsic Value (DCF)
A 10-year discounted cash flow, then the bridge from business value to value per share.
Reported cash flow → unlevered free cash flow
Free Cash Flow (reported)
$67B
+ After-Tax Interest Expense
$4.5B
= Unlevered Free Cash Flow
$71.5B
Business value (10-year DCF)
PV of Years 1–10
$629.5B
PV of Terminal Value
$1T
= Business Value
$1.7T
Terminal value share
62.21%
Business value → share value
Intrinsic Value (business)
$1.7T
+ Cash & Equivalents
$20.9B
− Debt
$40.3B
= Shareholders' Value
$1.6T
÷ Diluted Shares
7.45 billion
= Fair Value / Share
$220.93
Divided by 7.45 billion diluted shares — the weighted-average diluted count from the most recent quarterly income statement, for the quarter ended 2026-06-30.
Risk bucket → discount rate
low (9%)
Year-1 FCF
$71.5B
Trailing twelve months.
FY2024 $74.1B · FY2025 $71.6B · FY2026 $67B
Growth rate (yrs 1–10)
8%
Terminal growth (after yr 10)
3%
AI Analysis
Microsoft is valued using a 9% discount rate, a 'low' risk bucket assignment reflecting its dominant position in enterprise software, a robust balance sheet, and highly predictable, recurring revenue streams. The valuation forecasts growth at 8.00% for the next decade, balancing the expansive opportunities in cloud computing and AI against the reality of a massive existing cash flow base. The forecast begins with a fixed Year-1 free cash flow of $71.5B. We assume a terminal growth rate of 3%, which is fixed for all companies to align with long-term economic assumptions rather than specific business outcomes. The terminal value represents 62.2% of the total business value; this indicates that the majority of the valuation depends on performance in the distant future. To reach the fair value per share of $220.93, the model calculates the intrinsic value of the business, adds cash, and subtracts debt before dividing by 7.45 billion diluted shares. Comparing this estimate to the current price of $508.15 results in an upside to fair value of -56.52%. Because the current price is above the calculated fair value, no margin of safety exists. The final result is most sensitive to the growth rate assumption, as a significant portion of the intrinsic value relies on the terminal value calculation.
Overall Verdict
How the five signals above stack up together, then the full synthesis.
Earnings Yield
3.53% vs ~4-5% bond-yield benchmark
Return on Capital
45.62% ROC vs ~30% benchmark
Acquirer's Multiple
24.5x against a peer median of 22.9x (peers: 28.9x and 16.8x) — in line with the median, within 7.1%.
FS-Score
6/10 — Solid but mixed
Intrinsic Value
-56.52% upside to fair value
These checks provide two distinct views: the Return on Capital of 45.62% and an FS-Score of 6/10 describe an operational profile that exceeds benchmarks, suggesting strong business efficiency. Conversely, the valuation metrics present a different picture. The Earnings Yield of 3.53% sits below the bond-yield benchmark, while the Intrinsic Value check indicates a -56.52% upside to fair value, meaning the current price exceeds the computed estimate. The Acquirer's Multiple of 24.5x is within 7.1% of the peer median of 22.9x, indicating the price aligns with industry peers despite the overall valuation metrics pointing away from the framework's thresholds. This creates a tension between the operational quality metrics and the pricing data, where the business produces substantial returns but carries a market price that makes the valuation inputs less favorable relative to the benchmarks. The Intrinsic Value check would change this overall picture most significantly if the price were to move closer to the computed fair value estimate.
Comments
Notes from readers on MSFT — one each. Comments stay with the company, so they carry across to a later snapshot, and each one shows the date it was written.
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