Takeaways From Investor Meetings; Trending: Azure Capacity, Copilot Demand

Research evidence excerpt

Takeaways From Investor Meetings; Trending: Azure Capacity, Copilot Demand

TD Cowen Microsoft

Global Research May 14, 2026

VALUATION METHODOLOGY AND RISKS

Valuation Methodology

Software:

Our valuation methodology is primarily based on Enterprise Value to Free Cash Flow (EV/FCF),

followed by Price-to-Earnings (P/E). However, this varies by company; for instance, we will often

use Enterprise Value to Revenue (EV/Revs) or a discounted cash flow (DCF) analysis for software

companies that are primarily subscriptions-based, or for growth companies that have recently

entered the public equity markets.

We make investment recommendations on certain early stage, pre-revenue companies based

upon an assessment of their business model, technology, probability of market success,

and the potential market opportunity, balanced by an assessment of applicable risks. Such

companies may not be assigned a price target.

Investment Risks

The global economy or specific end markets significantly worsen, contracting IT spending and

impairing software growth. The rate of SaaS/Cloud adoption slows, resulting in prolonged sales

cycles and higher-than-anticipated quarterly volatility across much of our coverage universe.

Competition increases materially, driving deflationary pricing pressure and compressing

margins. In particular, innovation by new entrants in the software sector often produces

solutions with similar or better functionality at materially lower prices than incumbents’ legacy

offerings.

Risks To The Price Target

Slower-than-expected commercial cloud growth, slowing cloud spend, foreign currency risk,

negative economic conditions, inability to hire, increasing competition, and faster-than-

expected PC or Server market deceleration.

8 TDSecurities.com