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How do I use this slideshow?
1. The slideshow contains the most important forecasts for a company's divisions, or product lines.
2. Disagree with a forecast? Simply drag the trend-line to test your own what-if scenario, and see possible upside or downside risks for a stock.
3. Plot data for competitors and benchmarks using the "Competition" button.
4. In the slide caption, and the area below the slideshow, see the key trends impacting a given forecast, as well as historical explanations.
5. The first slide shows which one of a company's divisions, or product lines, contribute most to its stock price. Clicking on a division arm of the diagram, you can explore the most important forecasts for the division. -
How do we get the historical numbers for this chart?
Trefis has a team of in-house Analysts who gather historical data from company filings and other verifiable sources. The data and sources are available on the Trefis website.
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Who came up with the Trefis forecast for future years?
The Trefis team of in-house Analysts considers a variety of factors when projecting any forecast, and their rationale is explained on the Trefis website.
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How does my dragging the trendline on the chart impact the stock price?
1. We use forecasts for various business drivers to calculate forecasted Revenues and Profits for .
2. We then use forecasted Profits in a Discounted Cash Flow (DCF) model to obtain the Price Estimate for . -
How does Trefis come up with the Price estimate for a company?
The Trefis forecasts are used to calculate future revenues, costs and cash profits for . The future cash profits are then discounted to the present to arrive at the total value of . The total value divided by number of shares outstanding is the Price estimate.
VALUATION HIGHLIGHTS
- Productivity And Business Processes constitute 50% of the Trefis price estimate for Microsoft's stock.
- Intelligent Cloud constitutes 39% of the Trefis price estimate for Microsoft's stock.
- More Personal Computing constitutes 9% of the Trefis price estimate for Microsoft's stock.
WHAT HAS CHANGED?
MSFT Stock Performance In Recent Years
The increase in MSFT stock has been far from consistent. Returns for the stock were 52% in 2021, -28% in 2022, 58% in 2023, and 13% in 2024.
In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, 24% in 2023, and 23% in 2024 — indicating that MSFT underperformed the S&P in 2022 and 2024.
Latest Earnings
For Q4 2025, Microsoft reported $76.4 billion in revenue, up 18% y-o-y. Operating income was $34.3 billion, up 23% y-o-y, and Net income was $27.2 billion, up 24% compared to the prior-year quarter.
The company posted total revenues of $281.7 billion in FY 2025, up 15% y-o-y.
Note: Microsoft's FY'25 ended on June 30, 2025. Q4 FY'25 refers to the quarter that ended in June 2025.
Microsoft & OpenAI
Microsoft initially invested $1 billion in OpenAI in 2019. Over the recent years, AI has gained huge traction, specifically generative AI, which refers to technologies focused on producing automated text, visual, and audio responses. Microsoft's investment in OpenAI is now valued at $13 billion. As more products are being integrated with OpenAI, the demand for Microsoft cloud servers is growing.
Recent Important Acquisitions
- Fungible – Microsoft acquired Fungible for $190 million in 2023. Fungible is known for its data processing unit technology, which enhances the data center infrastructure capabilities.
- Activision Blizzard – Microsoft acquired Activision Blizzard in 2022 for $69 billion, following a delay in securing regulatory approvals. This acquisition granted Microsoft access to one of the most popular games: Call of Duty.
- Metaswitch – Microsoft acquired Metaswitch Networks for $270 million to expand its approach to empower operators, partner with network equipment providers, and deliver on the promise of 5G. The acquisition builds on the company's $1.35 billion acquisition of Affirmed Networks in 2020.
Microsoft's Acquisition History page offers a list of all acquisitions made by Microsoft in the last ten years.
POTENTIAL UPSIDE & DOWNSIDE TO TREFIS PRICE
Below are key drivers of Microsoft's value that present opportunities for upside or downside to the current Trefis price estimate for Microsoft:
Productivity And Business Processes
- Productivity And Business Processes revenues: We currently forecast Microsoft's revenues from Productivity and business software will increase to over $150 billion by 2030.
- Productivity and Business Processes Operating Margin: We currently forecast the operating margin to reach 51% by the end of the Trefis forecast period.
Intelligent Cloud Division
- Intelligent Cloud Revenues : We currently forecast Intelligent Cloud revenues to grow to over $250 billion by the end of our forecast period. This growth will be driven by the company's increased service offerings on its Azure platform, even as its server products continue to gain traction due to a change in the mix towards cloud-based services.
- Intelligent Cloud Operating Margin: We currently forecast the operating margin for this division to remain around 46% by the end of the Trefis forecast period.
More Personal Computing
- Microsoft's more personal computing revenues: We currently forecast Microsoft's more computing revenues to grow to over $150 billion by the end of the Trefis forecast period.
- Personal Computing Operating Margin: We currently forecast the operating margin to remain around 30% by the end of the Trefis forecast period.
BUSINESS SUMMARY
Microsoft makes money primarily through the sale of software server licenses, business productivity, and operating system software. Microsoft's business productivity software suite, MS Office, is used for word processing, spreadsheet preparation, presentations, and email. MS Office is sold primarily to businesses worldwide. Microsoft's operating system software, known as Windows, is sold primarily to PC manufacturers (such as Dell, HP, and Acer), which sell Windows-based PCs to consumers and businesses. Its Server software includes MS SQL and Windows servers sold to application development companies.
SOURCES OF VALUE
We believe Productivity Services and Intelligent Cloud are the most valuable segments of Microsoft for the following reasons:
MS Office Has High Market Share
Microsoft Office has a higher market share in the productivity market compared to the market share Windows OS has in the PC market. Even if users use Mac OS X over Windows OS for their personal computing needs, Microsoft's Office Suite is still one of the best available productivity suites on the platform. Even as more competition enters the productivity software industry, we still think that Office is substantially better than competing products.
Popularity of Azure Platform, Windows, and SQL Server
Due to the increase in business activity on the Internet, big data analytics has come to the fore. As a result, the popularity of cloud services (IaaS, PaaS) and SQL servers is rising. Furthermore, Microsoft's Azure platform has increased sales of its virtualized version of Windows Server. After the COVID-19 pandemic, the work-from-home order has increased the company's cloud services demand. The company is focusing on AI to drive its sales growth. Microsoft has AI data centers in over 60 regions around the world, and Azure-OpenAI usage is on the rise.
Methodology
Trefis analyzes how a company's products impact its stock price. Using mathematical models to forecast a company's future revenues, costs and cash profits then discounting them to the present, Trefis comes up with a Trefis Price. The Trefis Price is an estimate of the fair or intrinsic value of the company's present stock price.
The selection process
The Trefis tool currently covers 200+ symbols. In building its coverage Trefis selected companies using the following criteria:
- Companies with high interest among retail investors were more likely to be selected. Interest among retail investors was judged by percentage of retail ownership, overall volume of news flow, as-well-as general awareness in the marketplace.
- Market cap/size: Larger cap companies are more popular and cater to the interests of a larger set of investors/finance site visitors, and as-such were more likely to be selected.
- Sector-wise coverage build-out: Trefis also selected to cover companies in the same market, at the same time. For example, when Trefis started covering Apple, covering other companies like Hewlett Packard and Dell in the mobile, and notebooks/desktop markets was a natural next step.
Trefis initially started out covering companies in technology, media and telecom sectors. Since then it has expanded coverage to consumer, automotive, financial services and energy. Trefis is currently building out more coverage within industrials and will be moving into health care over the next year. Trefis also builds out coverage selectively on smaller companies that have high growth potential as well as companies that are in the process of going public and attract interest from finance site visitors and investors.
Trefis does not favor any companies, except follow the selection mechanism outlined above to guide its judgment.
The Trefis tool limitations:
- The Trefis price estimate may not converge with market price: The Trefis price estimate is an estimate of the intrinsic value of a company; just like a price estimate that any other Wall Street firm might come up with. Trefis understands that multiple factors, some quantifiable, and some not so easily tackled, influence a company's stock price. Though the Trefis view is a very detailed fundamental model of the business, it is still just a model - an artificial representation of the real company, which is much more complex.
- No user modification of structure: While Trefis allows users to modify forecasts for any of the drivers in its analysis of a company; it currently does not allow users to change the structure by adding or removing drivers or divisions.
The Trefis Tool Key assumptions
- The Trefis price includes forecasts of a company's fundamental drivers (examples: pricing, units, market share of a company's product lines), which are then factored into the Trefis price estimate for the company's stock.
- In addition, Trefis discounts a company's cash flows at a company-specific discount rate. Cash flows beyond the explicit forecast period are accounted for using a terminal growth rate.
IMPORTANT: The projections or other information generated by the Trefis price estimate tool regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Results will vary with each use and over time.