MSFT · Forward model · Bear case

The Bear case, 20 quarters out

Model as of 2026-08-25

Each segment is projected from its own operating driver, rolled up into consolidated cash flow, and discounted back to a fair value per share. The assumptions below are editable — change them and every number on this page moves with them.

Microsoft is the cleanest disclosure on this site and the model reflects that: revenue AND operating income are reported for all three segments every quarter, they sum exactly to the consolidated figures, and NOTHING here is apportioned. Six of the eight quarters are lifted straight from a filed segment table; the two fourth quarters are the full year less the nine months, which is arithmetic on two filed tables. Because Microsoft allocates every cost to a segment - it says so, and the three operating incomes sum to the consolidated total - the corporate overhead layer here is ZERO, which is unique among the models on this site. What is assumed is everything to do with capital. Microsoft states in the 10-K that 'it is impracticable for us to separately identify the amount of amortization and depreciation by segment', so the vertical margins are segment operating income with D&A added back at the SINGLE company-wide rate of 12.25% of revenue. That uniform add-back flatters Productivity, which uses far less infrastructure than Intelligent Cloud, and understates Intelligent Cloud by the same amount. Capital expenditure is disclosed only in total - $35.8B in the basis quarter, more than double a year earlier - and is split here 70/25/5 across Intelligent Cloud, Productivity and More Personal Computing. That 70% is the largest single judgement on the page and it drives the free cash flow of the segment that matters most. One further gap, and it is the opposite of the usual one: Microsoft publishes almost no VOLUMES. It gives Microsoft 365 Commercial seat growth without a seat count, removed Microsoft 365 Consumer subscribers as a metric in fiscal 2026 Q1, and reports Azure as a growth rate with no capacity or utilisation figure at all. All three verticals therefore run on growth drivers - not because nothing better exists conceptually, but because nothing better is published. On the projection: base lands the first projected quarter at $93.4B of revenue and holds capital expenditure near $35B a quarter while revenue grows, so capex intensity falls from 39.8% of revenue to about 24% by 2031 - that glide, not the growth rate, is what turns free cash flow from $14.8B a quarter into $46.4B. Two cross-checks worth stating because they are where a revenue-multiple model usually goes wrong. First, the exit: 7x terminal revenue on the 60.8% terminal EBITDA margin this model projects implies about 11.5x EBITDA, which is a defensible mature-software multiple rather than a number that quietly carries margin expansion the projection never reaches. The scenarios span 8.7x to 16.6x EBITDA on the same basis. Second, the balance: base fair value is 6.8% below the current price, and unlike most models here the terminal is not doing all the work - Microsoft earns real cash inside the horizon, so the present value of twenty quarters of free cash flow is a material share of the answer rather than a rounding error. That is a consequence of modelling a profitable company, and it is why the exit multiple is a smaller lever here than on any other page on this site.

Where each case comes from

From cash flow to fair value

The projected path

The published model's 20 quarters. The horizon and sliders above do not change this table.

Every row is projected. A year-over-year change is shown only where the quarter it compares against exists — an em dash means there is no comparable quarter, not a flat year.

Model revisions

Assumptions are marked to reality as each quarter prints. Every change is appended here, with the fair value the model produced at the time, so the model's own history stays visible.