Is Microsoft (MSFT) a Buy, Hold or Sell?

Microsoft — our independent, AI-built valuation and rating, in brief.

SELL

12-mo fair value

$380.00

To fair value

−23%

By José Luis Pascual, CFA · report dated 2026-08-09 · fair value derived independently of the market price.

The thesis, in brief

Microsoft's incremental return on newly deployed capital fell to 14.45% in FY2026 from 23.31% in FY2025 - just 495bp over my 9.50% WACC - while free cash flow declined for a second straight year to $66.987bn, so at $499.99 the shares require a 14.0% ten-year revenue CAGR to $1.23 trillion to be worth the price; I am wrong if Microsoft delivers FY2027 revenue growth above 20% with an FY2027 operating margin at or above 46% and free cash flow above $80bn

How we value it

We value Microsoft using 10-yr unlevered FCF/DCF, WACC 9.5%, g 3.0%; cross-checked on FY26 EV/EBITDA and FCF yield. The 12-month fair value is set from that intrinsic estimate first, then compared to the market to read the upside or downside — never anchored to the current price.

What the full report covers

Business & moat + industry cycle
Earnings quality & normalized EPS
Returns on capital (ROIC vs WACC)
Balance-sheet safety
Two independent valuations (DCF + multiples)
Bear / base / bull fair values
Earnings-call analysis
Insider activity & positioning
Technicals (RSI / ADX)
A falsifiable thesis

Read the full Microsoft report

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