Microsoft is a large, mature technology company that generates revenue primarily from three business segments: productivity and business processes, intelligent cloud, and personal computing. It has experienced steady revenue growth in recent years, especially in its intelligent cloud segment. Microsoft invests heavily in research and development, capital expenditures, and business acquisitions to further develop its cloud, artificial intelligence, and productivity offerings.

1. What do you get?
Microsoft (MSFT) analysis
1
2
3
4
5
What‘s their vision and where are the coming from?
How is the business structured?
How do they generate revenue?
How they develop products and in which stage is the company in it‘s lifecycle
How does Microsoft invest?
6 Opinion: Discounted cashflow analysis
7 Opinion:Comparable valuation
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5
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2. Goal & mission
Microsoft (MSFT) analysis
„To achieve our vision, our research and development efforts focus on
three interconnected amibitions:
1. Reinvent productivity and business processes
2. Build the intelligent cloud and intelligent edge platform
3. Create more personal computing“

3. History
Microsoft (MSFT) analysis
CEO and Founder
Bill Gates
2000: CEO
Steve
Ballmer
2014: CEO Satya Nadella
1998: Launch
of Windows
98
2001: Xbox
launch
2003:
Windows
Server &
office
system
2011: Office 365
2014: Nokia
2016:
LinkedIn
2022: Blizzard
2022:
Nuance

4. Microsoft (MSFT) analysis
Business structure
Description
Productivity and
business processes
1
Products
• Productivity and Business Processes
segment consists of products and
services in our portfolio of
productivity, communication, and
information services, spanning a
variety of devices and platforms.
• Office Commercial Suite
• Office Consumer
• LinkedIn
• Dynamics business solutions
Intelligent cloud
2
Personal Computing
3
• Intelligent Cloud segment consists of
our public, private, and hybrid server
products and cloud services that can
power modern business and
developers.
• Server products: Azure, SQL Server,
Windows Server, Visual Studio,
System Centers and others
• Enterprise Services & Consulting
• Our More Personal Computing
segment consists of products and
services that put customers at the
center of the experience with our
technology.
• Windows licensing
• Devices including Surface &
accessories
• Gaming
• Search advertising
EBIT contribution $
+ 29 B
+ 32 B
+ 21 B

5. Revenue overview
Microsoft (MSFT) analysis
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2016A 2017A 2018A 2019A 2020A 2021A 2022A
Chart title: Revenue contribution in % per business segment Implications
Personal computing
• Contribution to total Revenue in 2022: 30 %
• Trend: Declining; contribution in 2016: 44 %
Intelligent cloud
• Contribution to total Revenue in 2022: 38 %
• Trend: Increasing; contribution in 2016: 27 %
• Growth last four years: 23.6 %
Productivity and business processes
• Contribution to total Revenue in 2022: 32 %
• Trend: Stable; contribution in 2016: 28 %
Average
Growth rate
7 %
20 %
16 %
Growth rates
Y16 to Y22

6. Operating profit in 2022
Microsoft (MSFT) analysis
EBIT margins per business segment (%):
Productivity: 46.9 %
Intelligengt cloud: 43.5 %
Personal computing: 35.2 %
Total EBIT: 42.1 %
EBIT per business segment ($B):
Productivity: 29.68
Intelligengt cloud: 32.72
Personal computing: 20.97
Total revenue: 83.83
35%
40%
25%
Contribution (%) of business segment to
total EBIT
Productivity Intelligent
Cloud
Personal
computing

7. Products by revenue 2022
Microsoft (MSFT) analysis
33,9 % 22.6 %
12.4 % 8.1 %
6.9 % 5.8 % 3.7 % 3.4 %
2.6 %

8. Products by revenue
Microsoft (MSFT) analysis
Performance history from 2016 to 2022
Description
• Revenue growth increases steadly
• Profit margin is constant and
ranges between 64 % and 69 %
• EBIT, Net income & OCF margins
increased signifcantly from 2016.
• EPS is also growing heavily
2016 2017 2018 2019 2020 2021 2022
Total revenue $ 91 154 96 571 110 360 125 843 143 015 168 088 198 270
Total revenue growth yoy % 5,9% 14,3% 14,0% 13,6% 17,5% 18,0%
PROFIT $ 58 374 62 310 72 007 82 933 96 937 115 856 135 620
Profit margin % 64,0% 64,5% 65,2% 65,9% 67,8% 68,9% 68,4%
Total operating profit $ 27 188 29 331 35 058 42 959 52 959 69 916 83 383
EBIT margin % 29,8% 30,4% 31,8% 34,1% 37,0% 41,6% 42,1%
EBT $ 25 639 30 207 36 474 43 688 53 036 71 102 83 716
EBT margin % 28,1% 31,3% 33,1% 34,7% 37,1% 42,3% 42,2%
Net income $ 20 539 25 795 16 571 39 240 44 281 61 271 72 738
Net income margin % 22,5% 26,7% 15,0% 31,2% 31,0% 36,5% 36,7%
Cash generated by operating activities $ 33 325 39 813 43 884 52 185 60 675 76 740 89 035
OCF margin % 36,6% 41,2% 39,8% 41,5% 42,4% 45,7% 44,9%
Free cashflow $ 24 982 31 684 32 252 38 260 45 234 56 118 65 149
FCF margin % 27,4% 32,8% 29,2% 30,4% 31,6% 33,4% 32,9%
diluted EPS $ 2,56 3,25 2,13 5,06 5,76 8,05 9,65
EPS growth % 27,0% -34,5% 137,6% 13,8% 39,8% 19,9%

9. Company life cycle
Stage
Details
Start-up Young Growth High growth Mature growth Decline
Mature stable
Have an idea for a
business that meets an
unmet need in the
market.
Create a business
model that converts
ideas into potential
revenues & earnings
Build the business,
converting potential
into revenues.
Grow your business,
shifting from losses to
profits
Defend your business
from new competitors
& find new markets
Scale down your
business as market
shrinks.
Amount $
Revenue
Earnings
Time
Assumed age of
Microsoft in
lifecycle
Microsoft (MSFT) analysis

10. How does Microsoft produce products and what are the assoicated risks? risks
Microsoft (MSFT) analysis
• Most products are developed internally
• Focus on cloud computing, AI, devices and operating systems
• Main product research center in Redmond
Product
development
• Platform based ecoystem (Network effect), Competition from marketplace,
product or content
Strategic risk
• Cloud based services are developing and changing (AWS, IBM, Google, Oracle…)
• Open Software
01
02
03

11. How does microsoft invest their money?
Microsoft (MSFT) analysis
01 02 03
Working capital Capital expenditure Business acquisitions
• Negative networking capital
contributes positively to free
cashflow
• Net working capital as percentage
of revenue: -16 % on average from
2016 to 2022
• Change in networking capital
ranges between -0.5 and -2.8 %
• 12 % of revenue is invested
through capital expenditure in
2022
• Deprecation to capex ratio in 2022
was 0.6x (<1.0x) = The assets of
microsoft grow faster than they
depreciate
• Microsoft regularly adds new
business to it‘s platform
• In 2022 Microsoft added four
business to it‘s portfolio
• Nuance (AI)
• Miburo (cyber security)
• Minit (Productivity)
• Oribi (Data Analytics)
• Blizzard (Gaming)

12. Scenario used for valuation
Microsoft (MSFT) analysis
Base Downside Upside
15 % 13 % 17 %
25 % 23 % 27 %
11 % 9 % 13 %
44 % 42 % 46 %
43 % 41 % 45 %
35 % 33 % 37 %
Revenue growth
EBIT margin
Valuation inputs
• WACC based on open position per country = 8,94 %
• Terminal growth rate  10y US bond yield – 0.025% = 2.55 %
• Credit Rating AAA = Default spread 0.67 %
• Beta = 0.93
Productivity
Intelligent cloud
Personal computing
Productivity
Intelligent cloud
Personal computing

13. Discounted cashflow analysis
Microsoft (MSFT) analysis

14. Discounted cashflow analysis
Microsoft (MSFT) analysis
DCF Valuation Implication
• The EXIT muliplte is the average EV /
EBIDTA multiple based on the EBIDTA in
2028
• EXIT multiple = 20.0x
• The base case is used for the DCF valuation
graph
• The DCF valuation ranges from $319.14
(upside) to $235.95 (downside)

15. Comparables - operations
Microsoft (MSFT) analysis
Operations for 2023 are based on average growth rate (revenue) and margin (EBIT & EBIDTA)
Blue color = hard coded in spreadsheet
2019 2020 2021 TTM 2023 2019 2020 2021 TTM 2023 2019 2020 2021 TTM 2023
Apple AAPL 260 174 274 515 365 817 387 542 445 299 63 930 66 288 108 949 118 329 121 383 76 477 77 344 120 233 129 557 137 894
Alphabet GOOG 161 857 182 527 257 637 278 139 335 508 34 231 41 224 78 714 82 463 87 177 46 012 54 921 91 155 96 887 107 977
Meta META 70 697 85 965 117 929 119 411 143 307 23 986 32 671 46 753 39 890 51 943 29 727 39 533 54 720 48 034 62 576
Amazon AMZN 280 522 386 064 469 822 485 902 587 523 14 541 22 899 24 879 15 298 28 728 36 330 48 150 59 175 52 620 71 747
Maximum 280 522 386 064 469 822 485 902 587 523 63 930 66 288 108 949 118 329 121 383 76 477 77 344 120 233 129 557 137 894
75th percentile 265 261 302 402 391 818 412 132 480 855 41 656 47 490 86 273 91 430 95 729 53 628 60 527 98 425 105 055 115 456
Median 211 016 228 521 311 727 332 841 390 404 29 109 36 948 62 734 61 177 69 560 41 171 51 536 75 165 74 754 89 862
25th percentile 139 067 158 387 222 710 238 457 287 458 21 625 30 228 41 285 33 742 46 139 34 679 45 996 58 061 51 474 69 455
Minimum 70 697 85 965 117 929 119 411 143 307 14 541 22 899 24 879 15 298 28 728 29 727 39 533 54 720 48 034 62 576
Microsoft MSFT 125 843 143 015 168 088 198 270 233 205 42 959 52 959 69 916 83 383 94 294 54 641 65 755 81 602 97 843 115 202
Revenue EBIT EBITDA
Ticker
Company
• Based on revenue Microsoft is at the low end of the period
• EBIT and EBIDTA are above median

16. Comparables – valuation multiples
Microsoft (MSFT) analysis
2019 2020 2021 TTM 2023 2019 2020 2021 TTM 2023 2019 2020 2021 TTM 2023
Apple AAPL 11,0x 10,5x 7,8x 7,4x 6,4x 44,9x 43,3x 26,3x 24,2x 23,6x 37,5x 37,1x 23,9x 22,1x 20,8x
Alphabet GOOG 10,7x 9,5x 6,7x 6,2x 5,1x 50,4x 41,9x 21,9x 20,9x 19,8x 37,5x 31,4x 18,9x 17,8x 16,0x
Meta META 6,7x 5,5x 4,0x 3,9x 3,3x 19,6x 14,4x 10,1x 11,8x 9,1x 15,8x 11,9x 8,6x 9,8x 7,5x
Amazon AMZN 5,2x 3,8x 3,1x 3,0x 2,5x 100,9x 64,1x 59,0x 95,9x 51,1x 40,4x 30,5x 24,8x 27,9x 20,4x
Maximum 11,0x 10,5x 7,8x 7,4x 6,4x 100,9x 64,1x 59,0x 95,9x 51,1x 40,4x 37,1x 24,8x 27,9x 20,8x
75th percentile 10,8x 9,7x 7,0x 6,5x 5,5x 63,0x 48,5x 34,5x 42,2x 30,5x 38,2x 32,8x 24,1x 23,6x 20,5x
Median 8,7x 7,5x 5,3x 5,1x 4,2x 47,7x 42,6x 24,1x 22,6x 21,7x 37,5x 30,9x 21,4x 20,0x 18,2x
25th percentile 6,3x 5,1x 3,8x 3,7x 3,1x 38,6x 35,0x 19,0x 18,6x 17,1x 32,1x 25,8x 16,4x 15,8x 13,9x
Minimum 5,2x 3,8x 3,1x 3,0x 2,5x 19,6x 14,4x 10,1x 11,8x 9,1x 15,8x 11,9x 8,6x 9,8x 7,5x
Microsoft MSFT 17,3x 15,3x 13,0x 11,0x 9,4x 50,8x 41,2x 31,2x 26,2x 22,6x 39,9x 33,2x 26,7x 22,3x 18,6x
Revenue EBIT EBITDA
Ticker
Company
Operations for 2023 are based on average growth rate (revenue) and margin (EBIT & EBIDTA)
• Microsoft is the most expensive stock based on EV/Revenue multiple
• EV/EBIT & EV/EBIDTA multiples are above median but much cheaper in comparison to Apple and Amazon

17. Comparables – valuation multiples
Microsoft (MSFT) analysis
EBITDA
Ticker
Company Debt / EBIDTA Net Debt / EBIDTA
2020 2021 TTM 2023 2021 TTM 2023 2021 TTM 2023
Apple AAPL 77 344 120 233 129 557 137 894 1,0x 1,0x 0,9x (0,5x) (0,5x) (0,5x)
Alphabet GOOG 54 921 91 155 96 887 107 977 0,2x 0,1x 0,1x (2,9x) (2,7x) (2,5x)
Meta META 39 533 54 720 48 034 62 576 0,0x 0,0x 0,0x (0,9x) (1,0x) (0,8x)
Amazon AMZN 48 150 59 175 52 620 71 747 0,8x 0,9x 0,7x (0,8x) (0,9x) (0,7x)
Maximum 77 344 120 233 129 557 137 894 1,0x 1,0x 0,9x (0,5x) (0,5x) (0,5x)
75th percentile 60 527 98 425 105 055 115 456 0,9x 0,9x 0,7x (0,7x) (0,8x) (0,6x)
Median 51 536 75 165 74 754 89 862 0,5x 0,5x 0,4x (0,8x) (0,9x) (0,7x)
25th percentile 45 996 58 061 51 474 69 455 0,1x 0,1x 0,1x (1,4x) (1,4x) (1,2x)
Minimum 39 533 54 720 48 034 62 576 0,0x 0,0x 0,0x (2,9x) (2,7x) (2,5x)
Microsoft MSFT 65 755 81 602 97 843 117 261 0,7x 0,6x 0,5x (0,9x) (1,0x) (0,8x)
• Microsoft and all peers have negative net debt
Operations for 2023 are based on average growth rate (revenue) and margin (EBIT & EBIDTA)

18. Comparables - valuation
Microsoft (MSFT) analysis
Comparable valuation Legend
25th percentile
to median
Median to 75th
percentile
Current share
price 266 $
$0 $50 $100 $150 $200 $250 $300 $350 $400 $450 $500
EV / revenue 2021
EV / revenue TTM
EV / revenue 2023
EV / EBIT 2021
EV / EBIT TTM
EV / EBIT 2023
EV / EBIDTA 2021
EV / EBIDTA TTM
EV / EBIDTA 2023
P/E ratio 2021
P/E ratio TTM
P/E ratio 2023
Description
• The debt used in the
calcuation for the
enterprise value excludes
leases (also for microsoft)
• In comparison to the
companies Microsoft seem
to be fairly priced based
on EBIDTA and EBIT
• The revenue of Microsoft
for TTM (2022) is very low
in comparison to the peer
group