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What has to happen in More Personal Computing

Model as of

This page changes More Personal Computing inside the complete MSFT model. Every other vertical, corporate programme and valuation assumption stays in the selected portfolio case.

MSFT forward model
Horizon
Consolidated fair value $1,094.32 all other verticals held in this portfolio case
Final-quarter revenue $16.05B 6% of company revenue
Explicit segment contribution $66.84B EBITDA less segment capex, before corporate items

Satya Nadella's version: Microsoft moves down the cost-to-outcome curve fast enough that AI infrastructure becomes a software business again, Azure keeps compounding past $100B, and Copilot's 30 million paid seats become a per-seat uplift across a Microsoft 365 base measured in hundreds of millions. Every line is lifted, because the claim is about the platform rather than one segment. What this case does NOT contain is any figure Microsoft has published: there is no seat count for Microsoft 365 Commercial, no Azure capacity, no multi-year target and no segment capex. The uplift here is expressed as a margin delta and a higher exit multiple, which is a judgement wearing the costume of a mechanism - and at 11x terminal revenue it is the exit multiple, not the operating assumptions, doing most of the work.

More Personal Computing

Basis quarter$12.85B
Final quarter$16.05B
Implied CAGR+5%
Final revenue mix6%

The leg that is shrinking. $12.9B of revenue, down 4%, at a 21.4% operating margin - Windows OEM and devices, XBOX content and services, and Search advertising. Windows OEM and devices fell 7% and XBOX fell 10% in the quarter, and the segment carried impairment charges alongside severance in the same period Microsoft reported record profit. Search advertising is the one part growing. It is 14% of revenue and 7% of operating income, and its job in this model is to stop the other two from being flattered by a company average.

Last four quarters
2025 Q3 $13.76B Reported
2025 Q4 $14.25B Reported
2026 Q1 $13.19B Reported
2026 Q2 $12.85B Estimated
Windows OEM and DevicesXBOX content and servicesSearch advertising
Sequential growth −0.5%/qtr decaying toward +0.5% -0.5% a quarter. Windows OEM and devices fell 7% and XBOX 10%; this is a slow decline, not a collapse.
More Personal Computing

Latest: $16.05B (2031Q2E)

Period Value
2024Q3 $13.18B
2024Q4 $14.65B
2025Q1 $13.37B
2025Q2 $13.45B
2025Q3 $13.76B
2025Q4 $14.25B
2026Q1 $13.19B
2026Q2 $12.85B
2026Q3E $12.92B
2026Q4E $13.00B
2027Q1E $13.09B
2027Q2E $13.20B
2027Q3E $13.32B
2027Q4E $13.45B
2028Q1E $13.59B
2028Q2E $13.73B
2028Q3E $13.89B
2028Q4E $14.06B
2029Q1E $14.23B
2029Q2E $14.41B
2029Q3E $14.59B
2029Q4E $14.78B
2030Q1E $14.98B
2030Q2E $15.18B
2030Q3E $15.39B
2030Q4E $15.61B
2031Q1E $15.83B
2031Q2E $16.05B

Assumptions & reasoning

  • The only segment shrinking, and the only one where a model that extrapolates the company average would be badly wrong. Windows OEM and devices fell 7% and XBOX content and services fell 10% in the basis quarter.
  • XBOX impairment charges appear in the same quarter's discrete items alongside severance. The operating margin of 21.4% is after them, so the basis quarter is a depressed starting point rather than a run rate.
  • Search advertising is the growing part of this segment and Microsoft reports it only in the annual product table, where it rose to $15.2B. Quarterly it is invisible inside the segment total.
  • At 14% of revenue and 7% of operating income, this line cannot change the fair value much. It is carried because Microsoft reports it and because folding it into the other two would flatter both.
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