Microsoft Corp. engages in the development and support of software, services, devices, and solutions. It operates through the following business segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. 

The Productivity and Business Processes segment consists of Office Commercial (Office 365 subscriptions, the Office 365 portion of Microsoft 365 Commercial subscriptions, and Office licensed on-premises), Exchange, SharePoint, Microsoft Teams, Office 365 Security and Compliance, and Skype for Business, Office Consumer, including Microsoft 365 Consumer subscriptions, Office licensed on-premises, and other Office services, LinkedIn, including Talent Solutions, Marketing Solutions, Premium Subscriptions, Sales Solutions, and Learning Solutions, Dynamics business solutions, including Dynamics 365, comprising a set of intelligent, cloud-based applications across ERP, CRM, Customer Insights, Power Apps, and Power Automate, and on-premises ERP and CRM applications. 

The Intelligent Cloud segment consists of Server products and cloud services, including Azure and other cloud services, SQL Server, Windows Server, Visual Studio, System Center, and related Client Access Licenses (CALs), and Nuance and GitHub, Enterprise Services, including Enterprise Support Services, Microsoft Consulting Services, and Nuance professional services. 

The More Personal Computing segment consists of Windows, including Windows OEM licensing and other non-volume licensing of the Windows operating system, Windows Commercial, comprising volume licensing of the Windows operating system, Windows cloud services, and other Windows commercial offerings, patent licensing, and Windows Internet of Things, Devices, including Surface and PC accessories, Gaming, including Xbox hardware and Xbox content and services, comprising digital transactions, Xbox Game Pass and other subscriptions, video games, third-party video game royalties, cloud services, and advertising, Search and news advertising. 

PRICE TARGET

Microsoft has an odd fiscal year calendar which ends in June, so we will roll our valuation framework to using FY 2026 estimates (which reflects Jun 2025 - Jun 2026). Based on FY 2026's estimated EPS of $15.73, applying a 32x PE multiple gives our price target of $503/share. This 32x PE implies a 1.8x PEG ratio (earnings growth of 15%), a discount to the large-cap software cohort's average PEG at 2.0x. 

We also ran a discounted cash flow (DCF) model using FactSet's FCF estimates to 2028, assuming 10% terminal growth rate post 2028, with 12.35% CAPM discount rate. This model determines the fair stock price in 2024 to be $541.97/ share.