← MSFT forward model

MSFT · Forward model · Productivity and Business Processes · Nadella case

What has to happen in Productivity and Business Processes

Model as of

This page changes Productivity and Business Processes 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 $87.94B 33% of company revenue
Explicit segment contribution $574.26B 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.

Productivity and Business Processes

Basis quarter$37.85B
Final quarter$87.94B
Implied CAGR+18%
Final revenue mix33%

The profit engine, and until this quarter the largest segment: $37.8B of revenue at a 57.9% operating margin, which is the highest of the three by twenty points. Microsoft 365 Commercial and Consumer, LinkedIn and Dynamics - software sold by the seat, where the incremental seat costs almost nothing to serve. Microsoft 365 Copilot passed 30 million paid seats, roughly half again what it had in April, and it is sold as an uplift on seats Microsoft already owns rather than as a new product to a new buyer. That is why this segment can grow 14% while carrying the margin it does.

Last four quarters
2025 Q3 $33.02B Reported
2025 Q4 $34.12B Reported
2026 Q1 $35.01B Reported
2026 Q2 $37.85B Estimated
Microsoft 365 CommercialMicrosoft 365 ConsumerLinkedInDynamics 365
Sequential growth +3.0%/qtr decaying toward +1.8% 3% a quarter against 8% just delivered. Seat growth plus Copilot uplift, decelerated for a base case.
Productivity and Business Processes

Latest: $87.94B (2031Q2E)

Period Value
2024Q3 $28.32B
2024Q4 $29.44B
2025Q1 $29.94B
2025Q2 $33.11B
2025Q3 $33.02B
2025Q4 $34.12B
2026Q1 $35.01B
2026Q2 $37.85B
2026Q3E $39.76B
2026Q4E $41.72B
2027Q1E $43.71B
2027Q2E $45.75B
2027Q3E $47.84B
2027Q4E $49.99B
2028Q1E $52.19B
2028Q2E $54.45B
2028Q3E $56.78B
2028Q4E $59.18B
2029Q1E $61.65B
2029Q2E $64.20B
2029Q3E $66.83B
2029Q4E $69.55B
2030Q1E $72.36B
2030Q2E $75.27B
2030Q3E $78.27B
2030Q4E $81.39B
2031Q1E $84.61B
2031Q2E $87.94B

Assumptions & reasoning

  • Revenue AND operating income are both disclosed for this segment every quarter. Nothing on this line is apportioned, which is the reverse of most models on this site - here the economics are given and the volumes are not.
  • Microsoft publishes Microsoft 365 Commercial seat GROWTH but never the seat count, and it removed Microsoft 365 Consumer subscribers as a metric in the first quarter of fiscal 2026. There is therefore no absolute volume anywhere in this segment to build a driver on.
  • The 70.1% margin here is operating income with depreciation and amortisation added back at the company-wide rate. Microsoft says in the 10-K that identifying D&A by segment is impracticable, so the add-back is uniform and this segment - which uses far less infrastructure than Intelligent Cloud - is understated by it.
  • Copilot is sold as a per-seat uplift on an existing Microsoft 365 seat, so it raises revenue per user rather than user count. That is why this segment's growth can accelerate without any change in the seat metric Microsoft reports.
MSFT model map

Explore another vertical