Morningstar believes that the market may pay too much attention to the short-term cash flow pressure brought to Microsoft by AI investment and underestimate the long-term value of the continued expansion of Azure, CoPilot and enterprise AI services. The bank maintained a fair value of $600 per share, which is about 30 times the adjusted capital and profit ratio for the 2027 fiscal year. The bank gave Microsoft a broad moat rating, mainly based on the high conversion costs of commercial software and cloud services, the network effects of Microsoft 365 and LinkedIn, and the competitive advantages of Azure in terms of cost and scale. The Morningstar model estimates that Microsoft's free cash flow will bottom out in the 2027 fiscal year and improve year by year thereafter. Morningstar drastically raised Microsoft's capital expenditure estimates. It is estimated that cash capital expenditure will reach US$189.7 billion in fiscal year 2027 and further rise to US$226.3 billion in fiscal year 2028, accounting for about 47% of revenue for both years. Capital expenditure as a share of revenue is expected to peak at 47% in FY2028 and fall to 34% by FY2031, but it is still significantly higher than the capital-intensity of the software industry in the past.

Morningstar believes that the market may pay too much attention to the short-term cash flow pressure brought to Microsoft by AI investment and underestimate the long-term value of the continued expansion of Azure, CoPilot and enterprise AI services. The bank maintained a fair value of $600 per share, which is about 30 times the adjusted capital and profit ratio for the 2027 fiscal year. The bank gave Microsoft a broad moat rating, mainly based on the high conversion costs of commercial software and cloud services, the network effects of Microsoft 365 and LinkedIn, and the competitive advantages of Azure in terms of cost and scale. The Morningstar model estimates that Microsoft's free cash flow will bottom out in the 2027 fiscal year and improve year by year thereafter. Morningstar drastically raised Microsoft's capital expenditure estimates. It is estimated that cash capital expenditure will reach US$189.7 billion in fiscal year 2027 and further rise to US$226.3 billion in fiscal year 2028, accounting for about 47% of revenue for both years. Capital expenditure as a share of revenue is expected to peak at 47% in FY2028 and fall to 34% by FY2031, but it is still significantly higher than the capital-intensity of the software industry in the past.