Microsoft
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Microsoft Corporation is an American multinational technology conglomerate headquartered in Redmond, Washington.
From Wikipedia, CC BY-SA 4.0, revision of 31 Oct 2026.
What stands out
- Sales have grown about 14.6% a year for five years, so each $1 of sales in FY2021 is about $1.97 now.Revenue growth over 5–10 years: +14.6% a year
- Microsoft kept about 47 cents of operating profit from each $1 of sales in FY2026.Operating margin (operating income ÷ revenue): 46.8%
- Microsoft has earned more on its money than that money costs, in 5 of the last 5 years.Return on invested capital (ROIC); ROE for banks: 42.8% ROIC
Worth digging into
- For every $1 of reported profit over 5 years, about $0.72 turned up as spare cash.Free cash flow (operating cash flow − capex), and FCF ÷ net income: $67.0B
From filed figures and the weekly screener snapshot, 30 Oct 2026. Observations to check in the tabs below, not advice.
What has the price done?
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Press and drag across the chart to see the change between two points. Source: Yahoo Finance, delayed. Bars are daily and prices are adjusted for splits, not dividends. Past returns don't predict future returns.
Dividends
Full chart
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How does it make money?
What it does
Microsoft reports 3 businesses. In FY2026, productivity and business brought in 42%, intelligent cloud brought in 42% and personal computing brought in 16% of revenue.
By product, the biggest seller is server and cloud at 39% of revenue, then Microsoft 365 commercial at 31%.
By region, United States made up 51%, then Other countries at 49%.
From Microsoft Corporation (SEC EDGAR), Form 10-K for the fiscal year ended 30 Jun 2026.
Where the revenue comes from
- Productivity and business42%
- Intelligent cloud42%
- Personal computing16%
Shares of revenue, FY2026. Source: Microsoft Corporation (SEC EDGAR), Form 10-K for the fiscal year ended 30 Jun 2026.
How it makes money
Where Microsoft's FY2026 revenue came from, what it cost to earn, and what was left for shareholders.
- Income
- Costs and tax
- Profit
- % = share of revenue
Source: Microsoft Corporation (SEC EDGAR), Form 10-K for the fiscal year ended 30 Jun 2026 (29 Jul 2026), income statement, Note 18. FY2026 is the year to 30 Jun 2026. Figures as reported, in US$ millions in the tooltips and table.
Technical: gross margin was 67.9%, operating margin 46.8% and net margin 40.3%. Operating costs and cost of revenue together took 53.2% of revenue.
Plain: of every dollar of sales, about 32 cents paid for making or delivering what was sold, about 21 cents went on running and growing the business, and about 40 cents ended up as profit for shareholders.
Revenue by product
Revenue by business
Revenue by region
See the numbers
| FY2026 | US$M | % of revenue |
|---|---|---|
| Revenue | 331,839 | 100.0% |
| Cost of revenue | −106,374 | 32.1% |
| Gross profit | 225,465 | 67.9% |
| Research and development | −35,562 | 10.7% |
| Sales and marketing | −26,710 | 8.0% |
| General and administrative | −7,956 | 2.4% |
| Operating income | 155,237 | 46.8% |
| Other income (expense), net | 10,697 | 3.2% |
| Profit before tax | 165,934 | 50.0% |
| Income tax | −32,185 | 9.7% |
| Net profit to shareholders | 133,749 | 40.3% |
- Other income of US$10,697M includes US$6.5B of net gains from Microsoft's investments in OpenAI, mainly a dilution gain from OpenAI's recapitalisation, Microsoft says.
- Microsoft Cloud revenue, which spans several of these lines, was US$214.4B.
- Revenue by region follows the customer's location, as Microsoft reports it.
History and context
Microsoft Corporation is an American multinational technology conglomerate headquartered in Redmond, Washington. The company became influential in the rise of personal computers through software like Windows and has since expanded into areas such as Internet services, cloud computing, artificial intelligence and video gaming among others. A Big Tech company, Microsoft is the largest software company by revenue, one of the most valuable public companies, and one of the most valuable brands globally.
From Wikipedia's article Microsoft, the lead section as of the revision of 31 Oct 2026, retrieved 1 Nov 2026. Text under CC BY-SA 4.0, pronunciation guides removed. Wikipedia can be edited by anyone; the company's own filings are the primary source.
What it actually sells Soon
A product-by-product guide to Microsoft: what each one is, who buys it, and how much it brings in, in plain English and in the company's own terms. We're starting with the companies that are hardest to picture, like Broadcom.
Moat rating
Wide moat
9.1 / 10
ROIC averaged 63.4% over FY2022 to FY2026, 54.1 percentage points above a 9.34% cost of capital, and beat it every year. It has fallen as invested capital more than quadrupled, from US$69.8B to US$292.1B, but remains far above the hurdle.
Microsoft earns several times what its capital costs. The gap is narrowing as the money tied up in the business grows faster than profit, which is worth watching.
The numbers
10.0 / 10Return on invested capital against cost of capital, system and application software
- Average ROIC
- 63.4%
- Average excess return
- +54.1 pp
- Years above the hurdle
- 5 of 5
Spread 10 × 60% + durability 10 × 40% = 10.0
The sources
8.2 / 10Where Microsoft's advantage comes from
- 1. Brand and pricing power8 / 10
Gross margin of 67.9% and operating margin of 46.8% in FY2026.
Microsoft keeps nearly half of every sales dollar as operating profit, which only a business with pricing power can do.
- 2. Barriers to entry8 / 10
Microsoft Cloud revenue reached US$214.4B in FY2026 and Azure and other cloud services grew 41%. Research and development was US$35.6B.
Running a global cloud takes data centres, chips and engineers on a scale only a handful of companies can pay for.
- 3. Switching costs9 / 10
Productivity and Business Processes, home to Microsoft 365, LinkedIn and Dynamics, earned US$83.9B of operating income on US$140.0B of revenue, a 60% margin.
Companies run on Office, Teams and Windows. Retraining staff and moving years of files elsewhere is costly.
- 4. Network effects7 / 10
Office file formats, Teams and LinkedIn become more useful as more colleagues, partners and recruiters use them.
Everyone sends Word and Excel files because everyone else can open them.
- 5. Economies of scale9 / 10
Revenue of US$331.8B in FY2026. Intelligent Cloud earned a 41% operating margin on US$137.8B of revenue.
Microsoft can spread the cost of its software and data centres over hundreds of millions of users.
Return on invested capital: Microsoft Corporation (SEC EDGAR), Form 10-K for the fiscal year ended 30 Jun 2022; Microsoft Corporation (SEC EDGAR), Form 10-K for the fiscal year ended 30 Jun 2023; Microsoft Corporation (SEC EDGAR), Form 10-K for the fiscal year ended 30 Jun 2024; Microsoft Corporation (SEC EDGAR), Form 10-K for the fiscal year ended 30 Jun 2025; Microsoft Corporation (SEC EDGAR), Form 10-K for the fiscal year ended 30 Jun 2026. Hurdle: Aswath Damodaran, NYU Stern, Cost of capital by sector (US), data as of January 2026.
How we worked out ROIC: operating income after tax, divided by the capital invested at the start of the year. Tax is at the year's effective rate, or the 21% US federal rate where a pre-tax loss or a tax credit makes the effective rate meaningless. Invested capital is shareholders' equity plus borrowings, less cash and short-term investments, from the opening balance sheet in the same 10-K; lease liabilities are left out. This follows Damodaran's definition. The ratios are our calculation from the filed figures, not numbers the company reports.
Lens scores are rasinbun's judgment, reviewed 19 Oct 2026. A wide moat is a reason to dig deeper, not a verdict on the price. For education only. Not financial advice.
How we rate moats ›Is it a good business at a fair price?
What each method implies
Ranges, not targetsThe five questions, and the price
Six checks from the annual reports. A flag marks a reason to dig deeper, not a verdict.
- 1. Is it growing?Within the guide
+14.6% a year
Revenue growth over 5–10 years
Revenue $168.1B in FY2021 to $331.8B in FY2026; +13.8% a year over 10 years. It fell in 0 of the last 5 years.
Sales have grown about 14.6% a year for five years, so each $1 of sales in FY2021 is about $1.97 now.
What to look for Steady growth, not one lucky year.
Source: FY2021 10-K, filed 29 Jul 2021; FY2026 10-K, filed 29 Jul 2026.
- 2. Is it profitable?Within the guide
46.8%
Operating margin (operating income ÷ revenue)
FY2026 operating margin. 5-year average 44.2%, range 41.8% to 46.8%.
Microsoft kept about 47 cents of operating profit from each $1 of sales in FY2026.
What to look for Stable or rising. It's cleaner than net income, which one-off items and tax can distort.
Source: FY2026 10-K, filed 29 Jul 2026.
- 3. Is the profit real cash?Reason to dig deeper
$67.0B
Free cash flow (operating cash flow − capex), and FCF ÷ net income
FY2026 free cash flow: operating cash flow $182.9B less capex $115.9B. Over 5 years FCF was 72% of net income.
For every $1 of reported profit over 5 years, about $0.72 turned up as spare cash.
What to look for FCF positive and growing, and close to net income over time.
Source: FY2026 10-K, filed 29 Jul 2026.
- 4. Is it a good business?Within the guide
42.8% ROIC
Return on invested capital (ROIC); ROE for banks
FY2026 ROIC. 5-year average 63.4% against a 9.34% cost of capital, system and application software; above it in 5 of 5 years.
Microsoft has earned more on its money than that money costs, in 5 of the last 5 years.
What to look for Clearly above the cost of capital (roughly 8–10%). Sustained 15%+ usually means a moat.
Source: Our moat rating, Moat tab; Aswath Damodaran, NYU Stern, January 2026.
- 5. Can it survive a bad year?Within the guide
Net cash $36.5B
Net debt ÷ EBITDA or ÷ FCF, plus interest cover
FY2026 year end: borrowings $40.3B, cash and short-term investments $76.8B. Operating income covers interest 50.9x.
Microsoft holds more cash than it owes, so it could pay off its borrowings today.
What to look for Debt payable from about 3 years of FCF or less, interest covered many times.
Source: FY2026 10-K, filed 29 Jul 2026.
- 6. Is the price right?
1.7% FCF yield
FCF yield or EV/EBIT, and price against a cash-flow value
Market cap $3.9T. FCF yield 1.7% on FY2026 free cash flow. EV/EBIT 24.7x on FY2026 operating income. The valuation sheet's default story values it at US$356.00–US$579.89 a share (middle US$456.38); at US$529.05, its 16 Oct 2026 price, the price is +15.9% against the middle.
At this price, each $100 of shares comes with about $1.73 of last year's spare cash. On the sheet's default story the price sits above the middle of its value range, by 16%. Change the story and that moves.
What to look for Pay less than a cash-flow value estimate, with a margin of safety.
Source: Price $521.91, Yahoo Finance weekly snapshot, 30 Oct 2026; 7,426M shares, 10-K 23 Jul 2026; FY2026 10-K, filed 29 Jul 2026; Stock valuation, 16 Oct 2026.
US figures: each company's Form 10-K as tagged on SEC EDGAR, collected 19 Oct 2026. Free cash flow is operating cash flow less purchases of property and equipment. Borrowings exclude leases. For education only. Not financial advice.
Ten years of financials
FY2017 to FY2026, in US dollars.
Source: Microsoft, Form 10-K for each year as first filed, via SEC EDGAR XBRL. Latest: FY2026 10-K, filed 29 Jul 2026. Later restatements aren't applied.
How peers compare
Big tech platformsThe platforms are compared on growth, margins and how much of revenue turns into free cash once the capex bill is paid.
| Company | Revenue growth, 5y | Operating margin | FCF margin | P/E |
|---|---|---|---|---|
| MSFT | +14.6% a year | 46.8% | 20.2% | 29.1x |
| AAPL | +8.7% a year | 32.0% | 23.7% | 46.2x |
| GOOGL | +17.2% a year | 32.0% | 18.2% | 25.9x |
| META | +18.5% a year | 41.4% | 22.9% | 26.2x |
| AMZN | +13.2% a year | 11.2% | 1.1% | 33.5x |
- Peers' middle-half P/E
- 26.1x–36.7x (median 29.9x, 4 peers)
At the peers' middle-half P/E, Microsoft's earnings per share from the FY2026 10-K would put the share between $469 and $659. Those are the peer bars in the valuation chart above — one way to read the price, not a target.
Prices: weekly screener snapshot, 30 Oct 2026. Profits: each company's latest annual filing via SEC EDGAR, as filed. Peers are hand-picked for this industry. A multiple compares one year's profit with today's price; it says nothing about what either does next.
Discounted cash flow, from Stock valuation
Ten years of free cash flow to the firm, from Microsoft's latest figures and Damodaran's industry averages (Software (System & Application)). It's one story told with numbers, so it comes as a range.
- Value range, the default story$356.00–$579.89Middle $456.38 a share
- Price, 16 Oct 2026 close$529.05+15.92% ▲ against the middle
- What the price implies12.5% a yearGrowth in years 2–5 that makes value equal the price; the story uses 10.0%
To be worth today's price, Microsoft would need to grow sales about 12.5% a year in years 2–5. One way to read this is to ask whether that sounds believable.
The story's assumptions
- Revenue, last 12 months
- $331,839M
- Operating margin now
- 46.8%
- Revenue growth, year 1
- 17.9%
- Revenue growth, years 2–5
- 10.0%
- Growth after year 10
- 5.1%
- Target operating margin, by year 5
- 46.8%
- Sales to capital, years 1–5 / 6–10
- 1.54 / 1.54
- Tax rate now / after year 10
- 19.4% / 25.0%
- Cost of capital, years 1–5
- 10.3%
- Cost of capital after year 10
- 8.7%
- Return on capital after year 10
- 19.0%
- Chance of failure
- 0.0%
Value per share as two inputs change (revenue growth, years 2–5 down, target operating margin across)
| Revenue growth, years 2–5 | 41.8% | 46.8% | 51.8% |
|---|---|---|---|
| 7.0% | $356.00 | $397.55 | $439.11 |
| 10.0% | $407.96 | $456.38 | $504.81 |
| 13.0% | $467.33 | $523.61 | $579.89 |
Middle cell: the default story. Each step is 3 points of growth or 5 points of margin.
| Year | Growth | Revenue | Margin | Operating income | Tax rate | After-tax income | Reinvestment | Free cash flow | Cost of capital | Present value |
|---|---|---|---|---|---|---|---|---|---|---|
| 1 | 17.9% | $391,338M | 46.8% | $183,071M | 19.4% | $147,555M | $38,681M | $108,874M | 10.3% | $98,720M |
| 2 | 10.0% | $430,472M | 46.8% | $201,378M | 19.4% | $162,311M | $25,441M | $136,869M | 10.3% | $112,529M |
| 3 | 10.0% | $473,519M | 46.8% | $221,516M | 19.4% | $178,542M | $27,985M | $150,556M | 10.3% | $112,237M |
| 4 | 10.0% | $520,871M | 46.8% | $243,667M | 19.4% | $196,396M | $30,784M | $165,612M | 10.3% | $111,945M |
| 5 | 10.0% | $572,958M | 46.8% | $268,034M | 19.4% | $216,036M | $33,862M | $182,173M | 10.3% | $111,655M |
| 6 | 9.0% | $624,627M | 46.8% | $292,206M | 20.5% | $232,245M | $33,591M | $198,654M | 10.0% | $110,721M |
| 7 | 8.0% | $674,822M | 46.8% | $315,687M | 21.6% | $247,372M | $32,632M | $214,740M | 9.6% | $109,155M |
| 8 | 7.1% | $722,424M | 46.8% | $337,956M | 22.8% | $261,037M | $30,947M | $230,091M | 9.3% | $106,978M |
| 9 | 6.1% | $766,289M | 46.8% | $358,476M | 23.9% | $272,872M | $28,517M | $244,355M | 9.0% | $104,221M |
| 10 | 5.1% | $805,294M | 46.8% | $376,723M | 25.0% | $282,542M | $25,357M | $257,185M | 8.7% | $100,923M |
| After 10 | 5.1% | $846,283M | 46.8% | $395,898M | 25.0% | $296,924M | $79,523M | $217,400M | 8.7% | $2,369,748M |
- Present value of years 1–10
- $1,079,084M
- Present value after year 10
- $2,369,748M
- Less debt, plus cash
- −$51,970M
- Value of equity
- $3,396,862M
- Shares
- 7,443M
- Value per share, default story
- $456.38
Company figures: https://stockanalysis.com/stocks/msft/statistics/, TTM to Jun 2026 (=FY26). Industry averages: Aswath Damodaran, January 2026 US data. Risk-free rates: US 10-year Treasury 5.09% and Singapore 10-year 2.34%, 16 Oct 2026. Equity risk premium: Damodaran's implied premium of 4.20%, 1 Oct 2026. Company figures are the latest reported before 19 Oct 2026. Data as of 16 Oct 2026. The sheet follows the spreadsheets Aswath Damodaran publishes; it is not affiliated with or endorsed by him. A model's value is not a price target. For education only. Not financial advice.
Who owns it, and what's the mood?
Tracked investors and insiders
Trades in Microsoft by the people we follow: Warren Buffett and Michael Burry (13F), Grab's officers (Form 4) and Nancy Pelosi (House reports). They show what happened, often weeks later, not what to copy.
| Who | Did | Size | When | Disclosed |
|---|---|---|---|---|
| TemasekTemasek Holdings | TrimmedShares | −26,271 sharesabout $13,474,396 at quarter-end value | Q3 2026 | 28 Oct 202628 days after Q3 2026 ended |
| Bill AckmanPershing Square | AddedShares | +552,652 sharesabout $206,150,249 at quarter-end value | Q2 2026 | 14 Aug 202645 days after Q2 2026 ended |
| Terry SmithFundsmith | TrimmedShares | −483,000 sharesabout $180,168,660 at quarter-end value | Q2 2026 | 14 Aug 202645 days after Q2 2026 ended |
| David TepperAppaloosa | Sold outShares | −90,000 shares | Q2 2026 | 14 Aug 202645 days after Q2 2026 ended |
| Chris HohnTCI Fund Management | Sold outShares | −2,728,412 shares | Q2 2026 | 14 Aug 202645 days after Q2 2026 ended |
| Chase ColemanTiger Global Management | TrimmedShares | −233,087 sharesabout $86,946,113 at quarter-end value | Q2 2026 | 14 Aug 202645 days after Q2 2026 ended |
| Bill AckmanPershing Square | New positionShares | +5,654,078 sharesabout $2,092,970,053 at quarter-end value | Q1 2026 | 15 May 202645 days after Q1 2026 ended |
Sources: SEC EDGAR 13F-HR and Form 4 filings, and the US House Clerk's Periodic Transaction Reports, checked 30 Oct 2026. 13F values are the quarter-end value, not the price paid. All tracked trades ›
- Largest shareholdersSoonThe biggest holders from 13F filings and the annual proxy statement.—
- Chief executive and board holdingsSoonShares held by the CEO and directors, from the proxy statement and Form 4s.—
- Short interestSoonHow many shares are sold short, from exchange short-interest reports.—
Crowd favourite or value trap?
Neither is a label we can put on a stock. These are signs worth looking into, each from a figure on this page.
Signs of a crowd-driven price
Meme stocks move on attention more than on results: big swings, a price far from cash-flow value, thin profits.
0 of 4 signs
- NoSwings at least twice as much as the marketBeta 1.05, 5 years of monthly returns
- NoUp more than 100%, or down more than 50%, in a year1-year price change +1.62%
- NoPrice more than 50% above the valuation sheet's middle valuePrice +16% against the sheet's default story, 16 Oct 2026
- NoThin profits: operating margin under 5%, or a lossFY2026 operating margin 46.8%
Signs of a value trap
A value trap looks cheap because the business is shrinking or earning less than its capital costs.
0 of 4 signs
- NoLooks cheap: P/E under 12 or FCF yield over 8%P/E 29.1x, FCF yield 1.7%
- NoRevenue lower than five years agoRevenue +14.6% a year over 5 years
- NoReturns below the cost of capital5-year average ROIC 63.4% against 9.3%
- NoMore than 30% below its 52-week high−5.3% from the 52-week high
Prices, beta and 1-year change: Yahoo Finance weekly snapshot, 30 Oct 2026. Business figures: the five questions under Valuation and financials. A sign is a reason to dig deeper, not a verdict. For education only. Not financial advice.
Read it through a lens
Price data: Yahoo Finance, delayed. Company figures: each company's own filings, dated where they appear. A ticker on this site is not a recommendation. For education only. Not financial advice.