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Technology · Software - Infrastructure · MSFT

What Microsoft Does & How It Makes Money (MSFT)

Updated October 2026 · reflects Microsoft's latest reported financials

Global software and cloud giant behind Windows, Office, Azure and Xbox. Microsoft earns most of its revenue from software subscriptions and licenses (Microsoft 365, Dynamics 365, Windows, server products) and from usage-based cloud and AI services.

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How Microsoft makes money

Microsoft earns most of its revenue from software subscriptions and licenses (Microsoft 365, Dynamics 365, Windows, server products) and from usage-based cloud and AI services. It also makes money from LinkedIn subscriptions and ads, Xbox hardware, games and Game Pass subscriptions, and search advertising through Bing.

What Microsoft does

Microsoft, founded in 1975 and based in Redmond, Washington, is one of the world's largest technology companies. It operates three segments: Productivity and Business Processes (Microsoft 365, Teams, Copilot, LinkedIn, Dynamics 365), Intelligent Cloud (Azure-style cloud and AI consumption services, GitHub, SQL Server, Windows Server), and More Personal Computing (Windows licensing, Surface devices, Xbox, and Bing search advertising). The business combines recurring subscription and licensing revenue from businesses and consumers with usage-based cloud and AI services, plus consumer gaming and advertising. It sells through partners and retail networks and serves individuals and organizations worldwide.

Products & services

What is Microsoft worth?

On an owner-earnings DCF, Microsoft's most-likely value is about $374 versus a recent price near $535 (30% above fair value). But TacticScale only calls a stock undervalued when the price sits below its conservative no-growth floor (~$101) with a margin of safety — so the honest verdict here is “Fairly priced — no edge.” Fair value earns its keep only at the extremes, not in the wide middle.

Verdict: Fairly priced — no edge
Owner-earnings fair value · recent price ≈ $535
Fair value (most likely)
$374
Range
$192–$847
No-growth floor
$101
Price
~$535

Price sits in the normal range — fair value isn't actionable here; it earns its keep only when price drops below the no-growth floor, or runs to roughly double the optimistic case.

Analysis, not advice. Fair value is a margin-of-safety estimate from a deterministic owner-earnings DCF, not a price target or recommendation. See the full breakdown →

Sector Technology Industry Software - Infrastructure HQ United States Ticker MSFT Moat Wide moat (96/100) Official site

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