Historical teaching case · prepared as of 2026-08-03 · not maintained to track the company · educational material, not investment advice · capital at risk

MSFTMicrosoft Corporation$489·$3.63tnMIFP 18yimplied 18.1%base $396-19.1%

Workbench

Draft matches publish

Revenue buildup

5y growth 18.1%summary

Revenue by segment, in millions. Select a row to edit its growth path — the group row opens every segment.

Segment	FY26A	FY27	FY28	FY29	FY30	FY31	FY32	FY33	FY34	FY35	FY36	FY37	FY38	FY39	FY40	FY41	FY42	FY43	FY44	growth
Productivity and Business Processes	139,996	160,015	180,817	201,973	223,180	244,159	264,424	283,992	302,735	320,597	337,909	354,804	371,480	388,197	404,889	421,895	439,192	457,199	475,487	11.8%
Intelligent Cloud	137,791	176,235	226,814	290,322	368,128	459,056	562,344	676,499	797,593	922,017	1,046,489	1,166,836	1,281,186	1,390,086	1,492,953	1,590,741	1,684,595	1,776,405	1,868,423	27.2%
More Personal Computing	54,052	54,214	54,865	55,743	56,802	58,051	59,328	60,752	62,210	63,828	65,487	67,256	69,071	71,005	72,923	74,964	77,063	79,221	81,439	1.4%
Group revenue	331,839	390,464	462,496	548,038	648,110	761,266	886,096	1,021,243	1,162,538	1,306,442	1,449,886	1,588,896	1,721,737	1,849,289	1,970,765	2,087,600	2,200,850	2,312,826	2,425,350	18.1%

Operating economics

5y avg margin 45.4%summary

Operating margin, per cent of revenue. Tax and reinvestment follow below; the terminal assumptions sit on the premises panel.

Line	FY27	FY28	FY29	FY30	FY31	FY32	FY33	FY34	FY35	FY36	FY37	FY38	FY39	FY40	FY41	FY42	FY43	FY44	avg margin	Long-run
Operating margin	46.6	45.9	45.3	44.8	44.4	44.1	44.0	44.0	44.0	44.1	44.1	44.2	44.2	44.3	44.3	44.3	44.3	44.3	45.4%	44.3%

Tax & reinvestment

year-5 investment 216,694m

Cash tax as a share of operating profit; capital spend and working capital as net investment per unit of new sales — the rate the model charges against each year's revenue growth. Select a row to edit its annual path.

Line	FY27	FY28	FY29	FY30	FY31	FY32	FY33	FY34	FY35	FY36	FY37	FY38	FY39	FY40	FY41	FY42	FY43	FY44	Long-run driver
Cash tax rate	19.9%	20.1%	20.2%	20.3%	20.4%	20.5%	20.6%	20.7%	20.7%	20.8%	20.8%	20.9%	20.9%	21.0%	21.0%	21.0%	21.0%	21.0%	21.0%
Capital spend	205.0%	200.0%	193.0%	185.0%	177.0%	170.0%	162.0%	156.0%	152.0%	149.0%	147.0%	145.0%	143.0%	142.0%	142.0%	142.0%	142.0%	142.0%	142.0%
Working capital	14.5%	14.5%	14.5%	14.5%	14.5%	14.5%	14.5%	14.5%	14.5%	14.5%	14.5%	14.5%	14.5%	14.5%	14.5%	14.5%	14.5%	14.5%	14.5%

What the assumptions imply

prices out in 18y · FY44

Computed from the sections above and the premises panel — nothing here is editable. The walk runs to the highlighted crossover column — the first year the assumptions justify today's market price — and out to the 25-year ceiling when they never do, growing and shrinking as edits move the crossover.

Millions unless stated	FY27	FY28	FY29	FY30	FY31	FY32	FY33	FY34	FY35	FY36	FY37	FY38	FY39	FY40	FY41	FY42	FY43	FY44
Revenue
Group revenue	390,464	462,496	548,038	648,110	761,266	886,096	1,021,243	1,162,538	1,306,442	1,449,886	1,588,896	1,721,737	1,849,289	1,970,765	2,087,600	2,200,850	2,312,826	2,425,350
Revenue growth	17.7%	18.4%	18.5%	18.3%	17.5%	16.4%	15.3%	13.8%	12.4%	11.0%	9.6%	8.4%	7.4%	6.6%	5.9%	5.4%	5.1%	4.9%
Operating profit
Operating profit	181,822	212,386	248,097	290,107	338,004	390,896	449,834	511,435	575,201	638,773	700,498	760,794	817,415	872,699	924,283	975,773	1,024,948	1,074,388
Operating margin	46.6%	45.9%	45.3%	44.8%	44.4%	44.1%	44.0%	44.0%	44.0%	44.1%	44.1%	44.2%	44.2%	44.3%	44.3%	44.3%	44.3%	44.3%
Taxes	36,183	42,690	50,116	58,892	68,953	80,134	92,666	105,867	119,067	132,865	145,704	159,006	170,840	183,267	194,099	204,912	215,239	225,621
Operating profit after tax	145,639	169,696	197,981	231,215	269,051	310,762	357,168	405,568	456,134	505,908	554,794	601,788	646,575	689,433	730,184	770,861	809,709	848,766
Cash flow
Investment	128,682	154,508	177,498	199,645	216,694	230,311	238,535	240,908	239,599	234,531	224,501	211,882	200,893	190,110	182,848	177,237	175,241	176,100
Free cash flow	16,957	15,188	20,483	31,571	52,357	80,451	118,633	164,661	216,535	271,377	330,293	389,906	445,682	499,323	547,336	593,624	634,468	672,666
Returns	terminal return on new capital 21.0%
Reinvestment rate	88.4%	91.1%	89.7%	86.3%	80.5%	74.1%	66.8%	59.4%	52.5%	46.4%	40.5%	35.2%	31.1%	27.6%	25.0%	23.0%	21.6%	20.7%
Return on new capital — incremental ROIC	—	15.6%	15.9%	16.6%	17.5%	18.1%	19.5%	20.1%	21.1%	21.2%	21.8%	22.2%	22.3%	22.5%	22.3%	23.0%	22.2%	22.2%
Present value
Discounted free cash flow	15,527	12,734	15,726	22,194	33,702	47,420	64,028	81,375	97,987	112,447	125,318	135,460	141,779	145,448	145,988	144,982	141,889	137,745
Cumulative present value	15,527	28,261	43,986	66,180	99,882	147,302	211,330	292,705	390,691	503,139	628,457	763,917	905,696	1,051,144	1,197,132	1,342,114	1,484,003	1,621,748
Implied equity value	1,553,443	1,671,321	1,801,531	1,947,965	2,107,114	2,272,120	2,449,238	2,620,896	2,789,329	2,939,681	3,075,246	3,193,912	3,295,819	3,383,980	3,458,487	3,527,005	3,584,185	3,636,241

MSFT

Microsoft Corporation

Information Technology·USD·GM-3·FY2026 base·as of 2026-08-03

CompounderMed convictionAi cycle pricedMargin pressureExecution risk

What the market expects

MIFP18 yrsimplied forecast period

Implied growth18.1%rev CAGR priced in

Implied op margin44.4%year-5 priced in

Market price$489mcap $3.63tn

The analyst answers

Base case$396-19.1% vs mkt

Upside$561+14.6%

Downside$234-52.2%

The market

The analyst

Yours