Microsoft Corp (NASDAQ:MSFT) Earnings Model
Microsoft Modeling Approach
Revenue Modeling Approach: To forecast revenue this model applies growth rates to the four reportable segments: Productivity & Business Processes, Intelligent Cloud, More Personal Computing, and Corporate & Other.
Expense Modeling Approach: We use operating margin estimates for each segment to back into the three operating expense line items: Research & Development, Sales & Marketing, and General & Admin Expenses. We use historic averages to estimate Other Income, and apply an effective tax rate to the future projected income to forecast the Provision for Income Tax.
Non-GAAP Adjustments: We include Non-GAAP adjustments for Unearned Revenue and Windows Bundle Deferrals, and estimate future non-GAAP items based on ratios comparing each to the relevant segment revenue.
Share Count Forecast: To forecast the future share count we calculate the historic change in share count, after removing the impact of share repurchases. We then make estimates for future share repurchase volume and prices, and deduct the resulting share reduction in our forecast periods.
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