Dimitry Nakhla | Babylon Capital®
A quality valuation analysis on $MSFT 🧘🏽‍♂️

•NTM P/E Ratio: 27.29x
•3-Year Mean: 30.51x

•NTM FCF Yield: 2.09%
•3-Year Mean: 2.46%

As you can see, $MSFT appears to be trading below fair value on a forward earnings basis

Going forward, investors can expect to receive ~12% MORE in earnings per share & ~18% LESS in FCF per share🧠***

Before we get into valuation, let’s take a look at why $MSFT is a super business

BALANCE SHEET✅
•Cash & Equivalents: $102.01B
•Long-Term Debt: $35.38B

$MSFT has an excellent balance sheet, an AAA S&P Credit Rating & 58x FFO Interest Coverage Ratio

RETURN ON CAPITAL✅
•2021: 31.1%
•2022: 34.0%
•2023: 30.9%
•2024: 29.7%
•2025: 28.0%

RETURN ON EQUITY✅
•2021: 47.1%
•2022: 47.2%
•2023: 38.8%
•2024: 37.1%
•2025: 33.3%

$MSFT has strong return metrics, highlighting the financial efficiency of the business

REVENUE✅
•2021: $168.09B
•2026E: $326.83B
•CAGR: 14.22%

FREE CASH FLOW🆗*
•2021: $56.12B
•2026E: $75.05B
•CAGR: 5.98%

*This is largely due to heavy AI-related reinvestment — current 2028 FCF estimate $116.45B — worth noting operating cash flow increases underscore $MSFT efficient AI infrastructure scaling validating high ROI-potential

NORMALIZED EPS✅
•2021: $7.97
•2026E: $16.26
•CAGR: 15.32%

SHARE BUYBACKS✅
•2016 Shares Outstanding: 8.01B
•LTM Shares Outstanding: 7.46B

By reducing its shares outstanding ~7%, $MSFT increased its EPS by ~8% (assuming 0 growth)

MARGINS✅
•LTM Gross Margins: 68.8%
•LTM Operating Margins: 46.3%
•LTM Net Income Margins: 35.7%

PAID DIVIDENDS✅
•2015: $1.24
•2025: $3.32
•CAGR: 10.34%

***NOW TO VALUATION 🧠

As stated above, investors can expect to receive ~12% MORE in EPS & ~18% LESS in FCF per share

Using Benjamin Graham’s 2G rule of thumb, $MSFT has to grow earnings at a 13.65% CAGR over the next several years to justify its valuation

Today, analysts anticipate 2026 - 2028 EPS growth over the next few years to be more than the (13.65%) required growth rate:

2026E: $16.26 (19% YoY) *FY Jun

2027E: $18.75 (15% YoY)
2028E: $22.31 (19% YoY)

$MSFT has an excellent track record of meeting analyst estimates ~2 years out, so let’s assume $MSFT ends 2028 with $22.31 in EPS & see its CAGR potential assuming different multiples

30x P/E: $669💵 … ~17.9% CAGR

29x P/E: $647💵 … ~16.3% CAGR

28x P/E: $625💵 … ~14.7% CAGR

27x P/E: $602💵 … ~13.0% CAGR

26x P/E: $580💵 … ~11.3% CAGR

As you can see, we’d have to assume ~28x multiple for $MSFT to have attractive return potential

At 26x - 27x earnings $MSFT has ok CAGR potential

If $MSFT multiple expands slightly, >15% CAGR

$MSFT is one of the highest quality companies in the world & is firing on all cylinders

Today at $454💵 $MSFT appears to be a strong consideration for investment with a decent margin of safety

$MSFT has large margin of safety at $420💵, where I can reasonably expect ~13% CAGR while assuming a more conservative 25x
___

𝐃𝐈𝐒𝐂𝐋𝐎𝐒𝐔𝐑𝐄‼️

𝐓𝐡𝐢𝐬 𝐜𝐨𝐧𝐭𝐞𝐧𝐭 𝐢𝐬 𝐩𝐫𝐨𝐯𝐢𝐝𝐞𝐝 𝐟𝐨𝐫 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧𝐚𝐥 𝐚𝐧𝐝 𝐞𝐝𝐮𝐜𝐚𝐭𝐢𝐨𝐧𝐚𝐥 𝐩𝐮𝐫𝐩𝐨𝐬𝐞𝐬 𝐨𝐧𝐥𝐲 𝐚𝐧𝐝 𝐝𝐨𝐞𝐬 𝐧𝐨𝐭 𝐜𝐨𝐧𝐬𝐭𝐢𝐭𝐮𝐭𝐞 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐚𝐝𝐯𝐢𝐜𝐞, 𝐚𝐧 𝐨𝐟𝐟𝐞𝐫, 𝐨𝐫 𝐚 𝐬𝐨𝐥𝐢𝐜𝐢𝐭𝐚𝐭𝐢𝐨𝐧 𝐭𝐨 𝐛𝐮𝐲 𝐨𝐫 𝐬𝐞𝐥𝐥 𝐚𝐧𝐲 𝐬𝐞𝐜𝐮𝐫𝐢𝐭𝐲.

𝐁𝐚𝐛𝐲𝐥𝐨𝐧 𝐂𝐚𝐩𝐢𝐭𝐚𝐥® 𝐚𝐧𝐝 𝐢𝐭𝐬 𝐫𝐞𝐩𝐫𝐞𝐬𝐞𝐧𝐭𝐚𝐭𝐢𝐯𝐞𝐬 𝐦𝐚𝐲 𝐡𝐨𝐥𝐝 𝐩𝐨𝐬𝐢𝐭𝐢𝐨𝐧𝐬 𝐢𝐧 𝐭𝐡𝐞 𝐬𝐞𝐜𝐮𝐫𝐢𝐭𝐢𝐞𝐬 𝐝𝐢𝐬𝐜𝐮𝐬𝐬𝐞𝐝. 𝐀𝐧𝐲 𝐨𝐩𝐢𝐧𝐢𝐨𝐧𝐬 𝐞𝐱𝐩𝐫𝐞𝐬𝐬𝐞𝐝 𝐚𝐫𝐞 𝐚𝐬 𝐨𝐟 𝐭𝐡𝐞 𝐝𝐚𝐭𝐞 𝐨𝐟 𝐩𝐮𝐛𝐥𝐢𝐜𝐚𝐭𝐢𝐨𝐧 𝐚𝐧𝐝 𝐬𝐮𝐛𝐣𝐞𝐜𝐭 𝐭𝐨 𝐜𝐡𝐚𝐧𝐠𝐞 𝐰𝐢𝐭𝐡𝐨𝐮𝐭 𝐧𝐨𝐭𝐢𝐜𝐞.

𝐈𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐡𝐚𝐬 𝐛𝐞𝐞𝐧 𝐨𝐛𝐭𝐚𝐢𝐧𝐞𝐝 𝐟𝐫𝐨𝐦 𝐬𝐨𝐮𝐫𝐜𝐞𝐬 𝐛𝐞𝐥𝐢𝐞𝐯𝐞𝐝 𝐭𝐨 𝐛𝐞 𝐫𝐞𝐥𝐢𝐚𝐛𝐥𝐞 𝐛𝐮𝐭 𝐢𝐬 𝐧𝐨𝐭 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞𝐝 𝐚𝐬 𝐭𝐨 𝐚𝐜𝐜𝐮𝐫𝐚𝐜𝐲 𝐨𝐫 𝐜𝐨𝐦𝐩𝐥𝐞𝐭𝐞𝐧𝐞𝐬𝐬. 𝐏𝐚𝐬𝐭 𝐩𝐞𝐫𝐟𝐨𝐫𝐦𝐚𝐧𝐜𝐞 𝐝𝐨𝐞𝐬 𝐧𝐨𝐭 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞 𝐟𝐮𝐭𝐮𝐫𝐞 𝐫𝐞𝐬𝐮𝐥�[...]

�𝐬.
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Moon Dev
everything included

this pass includes algos, ai, solana, quant, and automation

you get the quant app, api key, plus private trading githubs

you also get daily paid live streams and full replays

mlk pricing ends today

claim access https://t.co/5lubmNh4F5

Moon Dev
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Fiscal.ai
PayPal is currently trading at its highest buyback yield ever: 11.3%

Value play or value trap?

$PYPL https://t.co/1neOZv1ZBu
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Moon Dev
RT @AJTraceyBTC: Getting to work with @MoonDevOnYT Quant app.
Downloading timeseries is very easy; there is no need to write a script. LET's goo! https://t.co/bvUM1sdYKT
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memenodes
Time to tell my mom to swap the silver to bitcoin https://t.co/fIclcqc0h2
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Dimitry Nakhla | Babylon Capital®
RT @aakashgupta: This is Anthropic telling you they stopped competing with OpenAI on chatbots at the end of 2024. Jared Kaplan, their Chief Science Officer, admitted it publicly. They’re building vertical AI infrastructure across five high-margin regulated industries where GPT-4 wrappers can’t compete.

The numbers tell the story. Revenue went from $1B in January 2025 to $5B+ by August. $183B valuation. Claude Code alone generates $1B in run-rate revenue with 10x growth in three months. They did $9B+ in 2025, projecting $26B in 2026.

Here’s the constraint nobody’s pricing in: Claude for Life Sciences launched in October with direct integrations into Benchling, 10x Genomics, and PubMed. Their Head of Biology said the goal is “a meaningful percentage of all life science work in the world running on Claude.” They’re not fighting for consumer attention. They’re embedding into the workflow layer where switching costs compound monthly.

The DOE Genesis Mission partnership gives them access to all 17 national laboratories for energy and biosecurity applications. The cybersecurity team doubled Claude’s success rate on Cybench in six months. The audio team is building speech language models while competitors are still optimizing text.

OpenAI is burning $74B through 2028 to own the ChatGPT interface. Anthropic is building the picks and shovels for regulated industries that require domain expertise, compliance frameworks, and enterprise integrations.

MCP, Agent Skills, Claude Cowork. All open standards. Microsoft already adopted Skills in VS Code and GitHub. Cursor, Goose, Amp running on Anthropic infrastructure. GitHub Copilot’s default model is Claude Sonnet.

They’re becoming the middleware layer that every AI application needs to touch regulated data.

That ABCDE is a roadmap for vertical integration into five industries worth trillions.

I read every one of Anthropic’s job openings so you don’t have to. Turns out they’re working on way more than code.

Here are the 5 biggest new surprises (ABCDE):
— Audio: even though they’ve focused primarily on text, there’s a new role to work on “understanding and generating speech and audio” including speech language models and audio diffusion models
— Biology: accelerate progress in life sciences by 10x
— Cybersecurity: they have a data, RL and engg to make “AI powered products for cybersecurity”
— Discovery: build an AI Scientist that solves “scientific Artificial General Intelligence”
— Eyes / Vision: improve Claude’s vision and spatial capabilities - Deedy
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memenodes
GETTING READY TO MAKE HISTORY https://t.co/I7llZ3Ww3w
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Startup Archive
Jack Zhang on why he said no to Stripe’s $1.2 billion offer to buy Airwallex

“In October 2018, Stripe reached out to buy us,” Airwallex co-founder Jack Zhang (@awxjack) begins.

Patrick Collison flew out to Shanghai to meet Jack and his co-founder, and they spent the day together. After the meeting, Patrick sent over a Google Doc that was 10-20 pages long and asked Jack to make comments.

“I was like, ‘Wow, the vision of the companies over the next decade is very much the same.’ We both wanted to build the AWS of financial services, and obviously Stripe was much further ahead of us. But this was before COVID. Stripe was like a $9 billion company — very similar to the scale of Airwallex today. I also really liked Patrick. It was like this guy is so smart.”

Asked what makes Patrick Collison so smart, Jack replies:

“He’s intellectually honest about everything, and he’s able to go deep in multiple dimensions.”

Eventually Stripe offered $1.2 billion for Airwallex, and according to Jack, he and his co-founders would’ve walked away with $350 million.

“I met with the whole team, and I was really impressed,” Jack recalls. “I basically said I think we’re going to do it.”

But when he flew back to Melbourne, Jack decided against it. And it was actually Patrick Collison who inspired him to reject the offer. Jack explains:

“So one of the things that really inspired me from talking and spending time with Patrick was I asked, ‘What’s the long-term thing for Stripe and yourself? Are you going to be here forever?’ And Patrick said to me that he’s going to build Stripe for the next 20-40 years. And I just never heard a founder tell me they will dedicate their entire life to building a business. And so that was inspiring to me, and I’m like that’s what I want to do.”

Today, Airwallex (@airwallex) is an $8B company, with more than $1B in ARR.

Video source: @twentyminutevc @HarryStebbings (2025)
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