How Does This Tech Giant Earn Revenue?
Microsoft builds and sells software, cloud services, and devices to consumers and enterprises. Its products span operating systems, productivity applications, and developer tools, alongside large-scale cloud infrastructure and related services. The company also runs a major gaming business and sells hardware that complements its software ecosystem. At roughly USD 2.8 trillion in market value, it operates at a scale where product breadth and global distribution matter as much as individual releases.
Are Margins Holding Up Amid Heavy Investment?
FundamentalsFor the year ended June 30, 2025, reported in USD, Microsoft generated revenue of about USD 281.7 billion, with EBIT of roughly USD 128.5 billion and net income of USD 101.8 billion. Over that same period, revenue grew 14.9% year over year, alongside TTM margins that remained elevated, including a 68.59% gross margin and a 46.62% operating margin.
Reinvestment showed up clearly in cash uses: capital spending was about USD 64.6 billion, against depreciation and amortization of USD 34.2 billion. Based on after-tax EBIT plus depreciation and amortization minus capital spending, the cash flow proxy was about USD 76.3 billion. The balance sheet snapshot shows USD 30.2 billion of cash and USD 3.0 billion of total debt.
Is The Market Pricing Growth Fairly?
DCF / MultiplesAt a current price of USD 373.07, the DCF fair value range runs from USD 264.66 in a weaker outcome to USD 421.79 in a central case and USD 611.17 in a stronger outcome, placing the stock within that range and below the central estimate. The headline multiples—23.02x earnings and 16.07x EV/EBITDA—frame a price that still leans on meaningful ongoing profit generation while funding sizable capital spending.
Fair Value With Execution Risk
TakeawayThe setup works if growth stays healthy while reinvestment remains productive. Big capital spending needs to keep translating into durable cash generation. If growth slows, today’s pricing can feel tight quickly. If spending rises faster than returns, cash can compress. Overall, the shares look more like a fair-value debate than a bargain.