Highlights
~30x P/E, de-rated after growth, and lower P/E than Alphabet.
Microsoft will swim well in the currents, whatever they are.
Dramatic CapEx and EBIT growth together imply good ROIC.
OpenAI exposure overstated, other growth drivers also strong.
At $506.06, we expect a 59% total return (17.5% p.a.) by Jun-29.
Introduction
Microsoft shares closed above $500 yesterday (August 10), for the first time since November 2025. After Q4 FY26 (April-June) results were released post-market on July 29, shares rose 15.5% on the following day and have since risen by a total of 29.6% in less than 2 weeks, though they are still 3.0% lower than a year ago:
MSFT Share Price (Last 1 Year)
Source: Google Finance (10-Aug-26).
Microsoft has been a top-5 position in our “Select 15” model portfolio since its inception at the start of 2023, and a key personal holding since 2014. We bought more both for the model portfolio and in real life during the share price’s collapse following Q2 FY26 results on January 28. The position currently shows a 67% gain in the model portfolio.
We believe shares are still attractively priced, relative to the huge earnings potential in AI, which is already evident in recent financials but often misunderstood, especially where Return on Invested Capital and OpenAI are concerned.
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