\n\n$ billions<\/p>\n<\/td>\n
\nQ3’22<\/strong><\/p>\n<\/td>\n\nQ2’22<\/strong><\/p>\n<\/td>\n\nQ1’22<\/strong><\/p>\n<\/td>\n\nQ4’21<\/strong><\/p>\n<\/td>\n\nQ3’21<\/strong><\/p>\n<\/td>\n\nY \/ Y Growth<\/strong><\/p>\n<\/td>\n<\/tr>\n\n\nRevenues<\/p>\n<\/td>\n
\n$ 49,360<\/p>\n<\/td>\n
\n$ 51,728<\/p>\n<\/td>\n
\n$ 45,317<\/p>\n<\/td>\n
\n$ 46.152<\/p>\n<\/td>\n
\n$ 41.706<\/p>\n<\/td>\n
\n18%<\/p>\n<\/td>\n<\/tr>\n
\n\nCash Flow From Operating Activities<\/p>\n<\/td>\n
\n$ 25,386<\/p>\n<\/td>\n
\n$ 14,480<\/p>\n<\/td>\n
\n$ 24,540<\/p>\n<\/td>\n
\n$ 22,710<\/p>\n<\/td>\n
\n$ 22,179<\/p>\n<\/td>\n
\n14%<\/p>\n<\/td>\n<\/tr>\n
\n\nCapital Expenditures<\/p>\n<\/td>\n
\n($ 5,340)<\/p>\n<\/td>\n
\n($ 5,865)<\/p>\n<\/td>\n
\n($ 5,810)<\/p>\n<\/td>\n
\n($ 6,452)<\/p>\n<\/td>\n
\n($ 5,089)<\/p>\n<\/td>\n
\n5%<\/p>\n<\/td>\n<\/tr>\n
\n\nFree Cash Flow<\/strong><\/p>\n<\/td>\n\n$ 20,046<\/p>\n<\/td>\n
\n$ 8,615<\/p>\n<\/td>\n
\n$ 18,730<\/p>\n<\/td>\n
\n$ 16,258<\/p>\n<\/td>\n
\n$ 17,090<\/p>\n<\/td>\n
\n17%<\/p>\n<\/td>\n<\/tr>\n
\n\nFree Cash Flow Margin<\/p>\n<\/td>\n
\n40.6%<\/p>\n<\/td>\n
\n16.7%<\/p>\n<\/td>\n
\n41.3%<\/p>\n<\/td>\n
\n35.2%<\/p>\n<\/td>\n
\n41.0%<\/p>\n<\/td>\n
\n–<\/p>\n<\/td>\n<\/tr>\n<\/table>\n
<\/span> <\/p>\n
(Source: Author)<\/p>\n
Microsoft is expected to grow its top line to $ 332.8B in FY 2026, implying 13.7% annual growth over the next four years. Assuming that the firm will be able to generate free cash flow margins of 33-35% by then, the firm is looking at annual free cash flow of $ 110-116B.<\/p>\n
\n <\/span> <\/picture>\nSeeking Alpha<\/span><\/p>\n<\/figcaption><\/figure>\n<\/p>\nDue to Microsoft’s growth in the cloud segment, especially Azure, I estimate that the software company could generate between $ 70-75B in free cash flow next year. With a current market cap of $ 2.0T, Microsoft trades at a (forward) P-FCF ratio of 27-28 X and a PE ratio of 25 X. Microsoft is also expected to grow its EPS at a higher rate (17.24%) this year than other large tech companies.<\/p>\n
\nData by YCharts<\/figcaption><\/figure>\n<\/p>\nConsidering the enormous amount of free cash flow Microsoft earns from software sales and cloud services as well as its high gross and free cash flow margins, I believe that Microsoft should be seen as a value stock.<\/p>\n