Microsoft's shares closed at $529.30 on 6 October 2026. Our Discounted Cash Flow (DCF), a model built from the cash the company should produce, puts them at about $260. Priced like four other tech giants, they would be worth between $414 and $538.
Those answers come from the two main ways to value a stock. One works out what the business is worth from its future cash. The other compares its price with similar companies. Here is how each works on Microsoft, what each assumes and why the answers differ so much.
How do you value a stock? There are two main ways. Intrinsic valuation, such as a Discounted Cash Flow (DCF), adds up the cash a business should produce in today's money. Relative valuation compares its price with similar companies, using ratios such as price to earnings.
Our DCF of Microsoft gave about $260 a share. The shares closed at $529.30 on 6 October 2026.
Priced on the median ratios of Apple, Alphabet, Amazon and Meta, Microsoft would be worth $414 to $538 a share, depending on the ratio.
Each method has a weak spot. A DCF rests on long forecasts. A ratio inherits whatever sits in the other companies' prices and profits.
The two ways to value a stock
A share is a small slice of a company, as What Is a Stock? explains. There are two families of methods:
Intrinsic valuation asks what the business is worth on its own. The main tool is the DCF. It forecasts the company's cash for many years, then shrinks each year back to today's money.
Relative valuation asks what similar companies cost. It divides each company's price by a measure such as profit or cash flow. These ratios are called multiples. A company on a lower multiple than its peers looks cheaper.
The first method needs a forecast. The second needs a fair comparison.
Intrinsic value: Microsoft's DCF
We built a ten-year DCF of Microsoft in What Is a DCF?, using figures from 24 September 2026. We reuse it here without changes.
It starts from free cash flow: the cash from running the business, minus capital spending on data centres and equipment. In the fiscal year to 30 June 2026, Microsoft made $182.9 billion of operating cash. It spent $115.9 billion, leaving $67.0 billion.
The DCF assumes free cash flow grows 15% a year for five years. Growth then fades to 2.5% by year 10. After that, it grows 2.5% a year forever.
Each year's cash is discounted at 9.7%. That is Microsoft's Weighted Average Cost of Capital (WACC), the return its shareholders and lenders expect, worked out in What Is WACC?. Added up, the shares come to $1,929 billion. Spread across 7.43 billion shares, that is about $260 a share.
The DCF also checks a second ending. Say the business could be sold after year 10 for 20 times its free cash flow. The value then rises to $319 a share.
Relative value: Microsoft and four tech giants on three multiples
For relative value, we compare Microsoft with Apple, Alphabet, Amazon and Meta. Every figure comes from their filings with the US Securities and Exchange Commission (SEC), on US accounting rules, over their last four reported quarters. Prices are closes on 6 October 2026.
We use three multiples:
Price to earnings (P/E): the share price divided by profit per share. We cover it in What Is the P/E Ratio?
EV/EBITDA: enterprise value (EV) divided by earnings before interest, tax, depreciation and amortisation (EBITDA). EV is the market value of the shares, plus debt, minus cash and marketable securities. EBITDA is operating profit with the yearly wear on equipment and other assets added back.
Price to free cash flow: market value divided by free cash flow, as in What Is Free Cash Flow?
Source: company SEC filings; YX Insights
Chart 1 shows each company's three multiples. Microsoft traded at 29.5 times earnings, 20.1 times EBITDA and 58.7 times free cash flow.
The rankings change from one multiple to the next. Alphabet had the lowest P/E, at 17.4, but the highest price to free cash flow, at 79.8. Apple had the highest P/E, at 38.3, but the lowest price to free cash flow, at 35.6.
Amazon has no price to free cash flow. Over the four quarters, it spent $173.0 billion on capital spending, more than its $161.4 billion of operating cash. So its free cash flow was negative, at minus $11.6 billion. The table shows the figures behind the chart.
Company (period) | Share price, 6 Oct 2026 | Market value | Enterprise value | Earnings per share | EBITDA | Free cash flow |
|---|---|---|---|---|---|---|
Microsoft (fiscal year to 30 Jun 2026) | $529.30 | $3,930 billion | $3,894 billion | $17.95 | $193.8 billion | $67.0 billion |
Apple (four quarters to 27 Jun 2026) | $333.63 | $4,869 billion | $4,891 billion | $8.72 | $168.0 billion | $136.7 billion |
Alphabet (four quarters to 30 Jun 2026) | $347.68 | $4,252 billion | $4,110 billion | $19.93 | $172.9 billion | $53.3 billion |
Amazon (four quarters to 30 Jun 2026) | $256.29 | $2,764 billion | $2,774 billion | $12.43 | $168.9 billion | minus $11.6 billion |
Meta (four quarters to 30 Jun 2026) | $738.88 | $1,882 billion | $1,876 billion | $26.55 | $109.7 billion | $41.0 billion |
Source: company SEC filings (Forms 10-K and 10-Q); YX Insights
Microsoft's value on each method, against its share price
To turn a multiple into a value, take the median multiple of the four peers. With four peers, the median is the mean of the middle two. Then apply it to Microsoft's own profit or cash flow.
P/E: the peer median was 24.2, the mean of Amazon's 20.6 and Meta's 27.8. Before rounding, it was 24.22. At 24.22 times Microsoft's $17.95 of earnings per share, the shares would be worth $435.
EV/EBITDA: the peer median was 20.44, the mean of Meta's and Alphabet's. Microsoft's EBITDA was $193.8 billion, so its EV would be $3,961 billion. Add Microsoft's net cash (its cash minus its debt) of $36.5 billion. Across 7.43 billion shares, that comes to $538 a share.
Price to free cash flow: the median of the three peers with positive free cash flow was Meta's 45.9. At 45.9 times Microsoft's $67.0 billion of free cash flow, the shares would be worth $414 each.
Source: company SEC filings; YX Insights
Chart 2 puts the five answers next to the share price. On EV/EBITDA, Microsoft was priced about in line with its peers. On P/E and price to free cash flow, the peer multiples gave values 18% and 22% below the share price.
The DCF answers sit much lower. The $260 value is 49% of the share price.
The gap comes from the question each method asks. Relative value asks if Microsoft is dear against other tech giants. The DCF asks if the cash it should produce justifies the price.
What each method assumes
A DCF assumes you can forecast cash flow for ten years, plus a growth rate after that. It also assumes the discount rate is right. In our Microsoft DCF, 57% of the value comes from the years after year 10.
Relative valuation assumes two things. The peers must be fairly priced. They must also be alike enough to compare. If all five companies are dear, Microsoft can look fair against them and still be dear on its own cash.
Where each method goes wrong
DCF: small inputs move the answer. In our DCF, moving the discount rate one point either way puts the value anywhere between $225 and $306.
You can also run a DCF backwards. Start from the price and ask what growth it needs. This is a reverse DCF. On the same inputs, the $529.30 price needs free cash flow growth of about 29% a year for five years.
Multiples: one-off gains distort profit. Alphabet's pre-tax profit over the four quarters included $149.0 billion of gains on shares it owns in other companies. Its filing says the second-quarter gain of $99.0 billion came mainly from its SpaceX shares and a stake in one private company. They made up 49.8% of its pre-tax profit, which pulls its P/E down.
Amazon is similar. In the quarter to June 2026, it booked $53.4 billion of pre-tax income from outside its main business, mainly from its investment in Anthropic, an artificial intelligence company.
Alphabet's gains push its P/E to the lowest of the group. Amazon's gain lowers its P/E too. Amazon sits in the middle pair of the four peers, so its gain feeds straight into the peer median. EV/EBITDA starts from operating profit, so it leaves such gains out.
Multiples: EBITDA leaves out capital spending. Amazon's EBITDA was $168.9 billion, while its free cash flow was negative. Microsoft's own free cash flow fell from $74.1 billion in fiscal 2024 to $67.0 billion in fiscal 2026. Over the same years, its capital spending rose from $44.5 billion to $115.9 billion.
How to use the two methods together
A few habits help with any company:
Use several multiples. One ratio can mislead. Three that agree tell you more.
Check what is in the profit. Look for investment gains, tax one-offs and legal charges before trusting a P/E.
Read the DCF backwards. Ask what growth today's price needs. Then judge if that growth is plausible.
Treat every answer as a range. Our Microsoft values ran from $260 to $538.
The two methods answer different questions. Relative value tells you how a stock is priced against its peers. Intrinsic value tells you what its cash flows support. For Microsoft on 6 October 2026, every method we ran came in below or close to the share price.
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Common questions about valuing a stock
What is the best way to value a stock?
No single method is best. Use both main methods, intrinsic and relative, then compare the answers. A Discounted Cash Flow values the business from its future cash. Multiples such as price to earnings compare it with similar companies. For Microsoft on 6 October 2026, the DCF gave about $260 a share, while peer multiples gave $414 to $538.
How do you calculate the intrinsic value of a stock?
The usual tool is a Discounted Cash Flow. Forecast the company's free cash flow for about ten years, plus a growth rate after that. Discount each year back to today at the cost of capital. Add net cash, then divide by the number of shares. Our Microsoft DCF used a 9.7% discount rate.
What is EV/EBITDA?
EV/EBITDA is enterprise value divided by earnings before interest, tax, depreciation and amortisation. Enterprise value is the market value of the shares, plus debt, minus cash. Because it starts from operating profit, it leaves out gains on investments. Microsoft traded at 20.1 times EBITDA on 6 October 2026, against a peer median of 20.4.
How do you know if a stock is undervalued?
A stock looks undervalued when its price sits below what its cash flows support, or below the multiples of similar companies. Check both, because they can disagree. Microsoft looked about fairly priced against its peers on EV/EBITDA. Its share price was still about twice our DCF value of $260.
DISCLAIMER: This article is strictly educational. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.