Microsoft Corp (MSFT)

Microsoft is one of the few very large companies that passes most of a Buffett-style screen on its own numbers. This page covers where the moat sits, what Azure growth means for the valuation, and the capital spending question now attached to it.

The business

Three businesses in one: Windows and Office, the Azure cloud platform, and everything from LinkedIn to Xbox. Azure is what the valuation turns on — it is the fastest-growing part, it carries the AI story, and it is where the capital spending goes. Office moved to subscription years ago, which turned a replacement-cycle product into recurring revenue and is a large part of why the cash flows are so stable.

The moat

Enterprise switching costs, and they are unusually high. Moving a large organisation off Active Directory, Exchange and Office means retraining everyone and rewriting integrations, so procurement decisions get made once a decade. Azure inherits that relationship. The moat is best assessed by looking at net revenue retention in the commercial cloud rather than at headline growth.

What to check before you value it

• Azure growth rate, not cloud revenue — The reported cloud segment mixes several things. The Azure growth rate is the number the valuation is sensitive to.
• Capital spending against operating cash flow — AI infrastructure is capital hungry. Check what proportion of operating cash flow is being consumed by capex, because free cash flow is what a valuation discounts.
• Commercial bookings — A forward-looking measure of contracted revenue, and a better early signal than the revenue line.
• OpenAI exposure — Both a competitive advantage and a concentration. Worth understanding the commercial terms rather than the headlines.

How much of it you already own

Microsoft is roughly 5.2% of the Vanguard S&P 500 UCITS ETF as at July 2026, the fourth-largest holding. See what is inside an ETF.

Recent filings

Azure at 33% growth is the figure to anchor on. A discounted cash flow on Microsoft is almost entirely a bet on how long that rate persists and how quickly capital spending normalises once the current infrastructure build is complete.

How Oak Growth scores it

Oak Growth runs Microsoft through the same four pillars as every other company it covers — moat, management, economics and value — and publishes a discounted cash flow intrinsic value alongside the margin of safety against the current price. Because those figures move with the market and with each set of results, they live in the app rather than on this page. See the 4-pillar method →

Common questions

Is Microsoft Corp undervalued?

That depends on the price on the day you ask. Oak Growth publishes a discounted cash flow intrinsic value for Microsoft Corp and the resulting margin of safety, updated from live market data rather than a fixed figure. The checks that decide it are set out on this page.

Does Microsoft Corp have an economic moat?

Yes, and it is one of the widest in software. Enterprise customers cannot move off Active Directory, Exchange and Office without retraining staff and rewriting integrations, so those decisions get made rarely and Azure inherits the relationship.

Is MSFT in index funds and ETFs?

Yes. Microsoft was around 5.2% of the Vanguard S&P 500 UCITS ETF as at July 2026, one of the four largest positions in most US index funds.

How do you value Microsoft Corp?

Discount free cash flow rather than earnings, because AI infrastructure spending is consuming a growing share of operating cash flow. The two inputs that matter most are the Azure growth rate and how long capital spending stays elevated.

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