Key Points

• Microsoft’s market value of about $3.57 trillion needs to climb about 40% to reach $5 trillion by the end of 2029.

• In fiscal 2026, the company grew revenue 18% and net income 31%.

• At the current price-to-earnings ratio, a $5 trillion Microsoft needs about $187 billion in annual profit.

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Microsoft (NASDAQ:MSFT) is worth about $3.57 trillion. For the software giant to be worth $5 trillion by the end of 2029, its value needs to climb about 40% from here.

The end of 2029 is about three and a third years away, so that climb works out to about 10% a year. That’s the whole prediction, reduced to arithmetic.

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And what makes it worth taking seriously, I think, is how modest the required rate looks next to what the company just did. In fiscal 2026 (the fiscal year ended June 30, 2026), Microsoft grew revenue 18% to $331.8 billion and net income 31% to $133.7 billion. The fourth quarter alone brought $90 billion of revenue, up 18% year over year.

There are two ways to get to $5 trillion. One asks the earnings to do all the work. The other asks the market to pay more for each dollar of them.

Image source: Getty Images.

The earnings path

Microsoft’s stock trades at about $480 per share as of this writing, which is about 27 times the $17.95 per share the company earned in fiscal 2026.

Hold that multiple steady, and a $5 trillion Microsoft needs to earn about $187 billion a year. That is about 40% more than fiscal 2026’s $133.7 billion — the same roughly 10% annual growth rate the market value needs.

For perspective, Microsoft grew net income 31% last fiscal year alone. Some of that came from gains tied to its investment in OpenAI. Adjusted for that impact, earnings per share still rose 22%. Either number is more than double the pace the prediction requires.

And the growth drivers behind those results don’t look exhausted. Azure revenue passed $100 billion for the fiscal year, and Azure and other cloud services revenue grew 43% year over year in the fourth quarter. The company’s commercial remaining performance obligations (contracted revenue it hasn’t yet recognized) reached $678 billion, up 84% year over year.

Next to figures like those, 10% annual earnings growth doesn’t look demanding.

The market already expects part of this. The stock costs about 25 times what analysts expect the company to earn over the coming year, and that consensus calls for adjusted earnings-per-share growth of about 14% — faster than the prediction requires.

If those expectations simply keep being met through 2029, the earnings multiple never has to budge and the company still arrives at $5 trillion.

The multiple path

Now suppose earnings growth cools. If profit growth slows to about 5% a year, Microsoft earns about $158 billion by the end of 2029 — and reaches $5 trillion only if investors pay about 32 times earnings for it.

That would be a meaningfully richer price than today’s, and it would have to take hold while growth is slowing. Investors don’t usually pay richer multiples for slowing growth.

In other words, the prediction has one dependable path, not two.

The spending is the swing factor

The thing that could break the earnings path is the same thing powering it — artificial intelligence (AI) spending. Microsoft is investing heavily in data centers to serve AI demand, and that capital spending eventually lands on the income statement as depreciation. If those costs grow faster than the revenue they support, margins compress, and 10% annual earnings growth gets harder than it sounds.

The fiscal 2026 numbers show no sign of that in operating margin yet. Operating income rose 21% for the year, faster than revenue. But operating income is the line to watch each quarter from here.

Ultimately, $5 trillion by the end of 2029 asks Microsoft to grow earnings at about a third of the pace it just delivered, while holding the price-to-earnings ratio it already carries. Against an 18% revenue year, a 43% quarter in Azure and other cloud services, and a $678 billion backlog, I think the bar is low and the company clears it comfortably.

The caveat is that the price-to-earnings ratio, not the business, is the fragile part of the prediction. At about 27 times earnings, Microsoft isn’t priced for extreme expectations. But a stretch of margin pressure from the AI build-out could compress that multiple faster than earnings grow.

The business looks capable of earning its way to $5 trillion by the end of 2029. Whether the stock gets there on time depends on that 27-times price holding up, and that part may be harder to predict.

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Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft. The Motley Fool has a disclosure policy.