Introducing Valuation Models! 
Key Takeaways:
- Microsoft stock could reasonably reach $620/share by mid-2027, based on our valuation assumptions.
- That implies a 26.2% total return from today’s price of around $491/share, with an annualized return of 12.3% over the next two years.
- Microsoft continues to deliver strong growth, with industry-leading margins, expanding cloud and AI businesses, and a dominant position across software, infrastructure, and enterprise services.
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Microsoft (MSFT) is a global technology leader with core businesses across cloud infrastructure (Azure), productivity software (Office, Teams), operating systems (Windows), and enterprise platforms.
It also owns LinkedIn, GitHub, and Xbox, while rapidly expanding in AI through its partnership with OpenAI and integration of generative AI across its product suite.
Microsoft benefits from massive scale, high recurring revenue, and strong free cash flow, which all support its continued investment in innovation and shareholder returns.
Here’s why the stock looks undervalued today.
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What the Model Says for Microsoft Stock
We ran a detailed valuation analysis on Microsoft using TIKR’s Valuation Model to estimate upside potential through mid-2027.
Based on reasonable assumptions for 13.9% revenue growth, 45.2% operating margins, and a 30.1x P/E multiple, the model estimates Microsoft stock could rise from $491/share today to $619.65/share over the next 2 years, representing a 26.2% total return and 12.3% annualized returns.
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Our Valuation Assumptions
TIKR’s Valuation Model lets you plug in your own assumptions for a company’s revenue growth, operating margins, and P/E multiple, and calculates the stock’s expected returns.
Here’s what we used for Microsoft stock:
1. Revenue Growth: 13.9% CAGR through 2028
Microsoft has grown revenue by 15.7% over the past year and 14.3% annually over the last five years. We used a 13.9% forecast to reflect ongoing momentum in cloud, AI, and enterprise software, while remaining slightly conservative.
2. Operating Margins: 45.2%
MSFT’s EBIT margin was 44.6% over the last twelve months, up from 41.5% over the last five years. We assumed a modest improvement to 45.2% as the company gains more efficiency from scale and higher-margin AI products.
3. Exit P/E Multiple: 30.1x
Microsoft currently trades at around 34.1x forward earnings. We used a slightly more conservative 30.1x multiple to reflect strong quality, but also account for potential multiple compression if rates remain high.
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What Happens If Things Go Better or Worse?
TIKR’s valuation tool allows investors to test a wide range of outcomes based on how a company like Microsoft might perform.
Here’s a breakdown of Microsoft’s potential returns through 2030 depending on how its business trends evolve (these are just model estimates):
- Low Case: Slower growth and multiple compression → 6.1% annual returns
- Mid Case: Steady execution and solid profitability → 13.3% annual returns
- High Case: Stronger-than-expected AI growth and margin gains → 18.7% annual returns
Even in a conservative scenario, Microsoft is positioned to deliver positive returns, while the upside case offers double-digit compounding, driven by scale, pricing power, and next-gen growth segments.
See analysts’ growth forecasts and price target for Microsoft (It’s free!) >>>
TIKR Takeaway
Microsoft remains one of the highest-quality businesses in the market, combining strong growth, elite profitability, and consistent execution.
The company continues to benefit from leadership in cloud computing, enterprise software, and AI, while also maintaining best-in-class margins and a rock-solid balance sheet.
With an estimated 26% upside by mid-2027 and the potential for 12%+ annual returns, Microsoft offers a compelling blend of stability and growth, even after its recent rally.
It’s best suited for long-term investors who want exposure to transformative tech trends, underpinned by a durable, high-margin business model.
Is Microsoft stock worth buying at today’s price? Use TIKR’s Valuation Model and analyst forecasts to find out if it’s still undervalued.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
