Microsoft (MSFT): How Does Copilot’s Retail Expansion and Dividend Hike Impact Valuation?

Microsoft (MSFT) just unveiled something that could reshape how consumers interact with AI and online shopping. The company’s Copilot platform is now rolling out a collaboration with Curated for You, bringing personalized, conversational fashion discovery to millions of users. It's a big leap toward positioning Copilot as an indispensable digital companion, not just for productivity, but as a driver of shoppable, real-time experiences with top retailers. Alongside this launch, Microsoft’s board approved a 10% dividend hike, reflecting both confidence in future earnings and commitment to shareholders.

This wave of product and partnership announcements caps off a period of energetic momentum for Microsoft. The stock has climbed 24% so far this year and is up nearly 20% over the past 12 months, reflecting how investors see strong execution, continual ecosystem expansion, and steady profit growth. While Copilot is grabbing headlines, Microsoft has also landed new partnerships and certifications in manufacturing, healthcare, and AI security. The company’s ability to keep layering on real-world use cases is increasingly visible in both market sentiment and its bottom line.

So, with this kind of growth and innovation on display, is Microsoft’s latest move a genuine buying opportunity, or has the market already priced in its potential for future expansion?

Most Popular Narrative: 22% Overvalued

According to the most widely followed narrative, Microsoft is viewed as significantly overvalued compared to its estimated fair value. The discussion centers around whether its dominant position in AI, cloud computing, and gaming justifies its current market premium.

AI and Cloud Dominance: Increased enterprise AI adoption will drive higher Azure demand and enhance productivity tools (Copilot, Dynamics AI).

Cybersecurity Expansion: Microsoft is growing its security software business, competing with CrowdStrike, Palo Alto, and Zscaler.

Curious why this narrative has such a high bar for Microsoft’s worth? There’s a bold financial roadmap baked into this outlook. It all comes down to how much growth can be squeezed from recurring revenues, next-gen cloud bets, and margin expansion, not just what’s happening today, but five years from now. Find out which assumptions flip the script on what most investors believe right now.

Result: Fair Value of $423.14 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, regulatory scrutiny or unexpected competition in AI and cloud services could quickly challenge Microsoft’s bullish outlook and put pressure on its premium valuation.

Find out about the key risks to this Microsoft narrative.

Another View: Cash Flow Signals

Switching gears, our SWS DCF model approaches Microsoft's value by forecasting its future cash flows and discounting them back to the present. This method suggests Microsoft is currently above its estimated fair value. Could this signal caution for investors, or does it highlight the limits of valuation models?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Microsoft for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Microsoft Narrative

If you see the story differently or want to dig into the numbers yourself, crafting your own analysis is quick and straightforward. It takes just a few minutes. Do it your way

A great starting point for your Microsoft research is our analysis highlighting 2 key rewards and 1 important warning sign that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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