QQNYSE

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DCF Valuation

⚠️Model Warnings

•Terminal value represents 86% of enterprise value. Valuation highly sensitive to long-term assumptions.

DCF Valuation Summary

Strong Buy

Fair Value: $217.30 per share(market-calibrated)

+75.1%

Upside to Fair Value

Current

$124.07

Pure Model

$254.20

Fair Value

$217.30

Bull Case

$297.39

Bear Case

$204.71

Market Reality Check

Model Terminal Growth

3.75%

Market-Implied Growth

0.73%

Calibrated Growth

2.69%

Fair value uses 65% model / 35% market-implied terminal growth. Pure model: $254.20.

What's Driving This Ratingfor Q

✓

CapEx already efficient

CapEx at 4.83% of revenue is already at or below sector maintenance level. No normalization needed — cash conversion is already strong.

↑

Margin expansion modeled

Current EBIT margin is 20.02% — below the sector mature average of 25.00%. Model expands margins as the business scales and operating leverage kicks in. Year 10 EBIT reaches $2.1B (23.37% margin).

→

Moderate revenue growth

Analyst consensus projects 7.65% revenue growth, fading to 3.75% by Year 10. Revenue reaches $9.2B (vs $4.8B today).

🎯

Market pricing in lower growth than model

The market implies only 0.73% perpetual growth — 302bps below the model's 3.75%. This suggests the market sees headwinds or risks not in the model.

✓

Strong cash flow conversion

Year 10 FCF/EBITDA conversion of 63.20% indicates efficient cash generation. FCF reaches $1.7B by Year 10 (18.79% FCF margin).

Weighted Average Cost of Capital (WACC)

Cost of Equity (CAPM)

Risk-Free Rate (Rf)4.50%

Beta (β)-4.04

Market Risk Premium4.50%

*Using current implied premium (4.5% per Damodaran 2026), not historical (6.5%)

Cost of Equity (Re)-13.69%

Cost of Debt

Pre-tax Cost of Debt1.73%

Tax Rate24.22%

After-tax Cost of Debt1.31%

Equity Weight (E/V)83.92%

Debt Weight (D/V)16.08%

WACC Calculation

WACC = (E/V × Re) + (D/V × Rd × (1-Tc))

WACC = (83.92% × -13.69%) + (16.08% × 1.31%)

= 5.50%

10-Year Free Cash Flow Projections(showing years 1, 3, 5, 7, 10)

Year	Year 1	Year 3	Year 5	Year 7	Year 10
Revenue	$5.1B	$5.7B	$6.8B	$7.9B	$9.2B
EBIT	$1.0B	$1.2B	$1.4B	$1.7B	$2.1B
Tax	$248M	$279M	$329M	$419M	$520M
NOPAT	$776M	$872M	$1.0B	$1.3B	$1.6B
+ Depreciation	$326M	$366M	$432M	$505M	$585M
- Capex	$247M	$278M	$328M	$383M	$443M
- Δ NWC	$46M	$33M	$78M	$70M	$42M
Free Cash Flow	$809M	$928M	$1.1B	$1.4B	$1.7B
Discount Factor	0.948	0.852	0.765	0.687	0.585
Present Value	$767M	$790M	$809M	$938M	$1.0B

FCF Formula: Free Cash Flow = NOPAT + Depreciation - Capex - Change in Net Working Capital

Terminal Value Calculation

Perpetuity Growth Method

Year 10 FCF$1.7B

Terminal Growth Rate3.75%

WACC5.50%

TV = FCF₁₀ × (1+g) / (WACC-g)

Terminal Value$89.5B

PV of Terminal Value$52.4B

Exit Multiple Method

Year 10 EBITDA$2.7B

Exit Multiple (EV/EBITDA)28.0x

TV = EBITDA₁₀ × Exit Multiple

Terminal Value$76.4B

PV of Terminal Value$44.7B

Valuation Summary

Perpetuity Growth Method

PV of Projected FCFs$8.7B

PV of Terminal Value$52.4B

Enterprise Value$61.1B

(-) Net Debt$4.1B

Equity Value$57.1B

Shares Outstanding209M

Price per Share$272.44

Exit Multiple Method

PV of Projected FCFs$8.7B

PV of Terminal Value$44.7B

Enterprise Value$53.5B

(-) Net Debt$4.1B

Equity Value$49.4B

Shares Outstanding209M

Price per Share$235.95

Pure Model Fair Value

$254.20

Average of perpetuity growth and exit multiple methods (before market calibration)

Sensitivity AnalysisPrice per Share

WACC ↓ / Growth →	2.75%	3.25%	3.75%	4.25%	4.75%
3.50%	$271.82	$259.73	$248.21	$237.23	$226.77
4.50%	$271.82	$259.73	$248.21	$237.23	$226.77
5.50%	$219.22	$239.77	$248.21	$237.23	$226.77
6.50%	$177.43	$187.01	$200.08	$218.96	$226.77
7.50%	$149.83	$155.15	$161.89	$170.70	$182.71

How to read: This table shows how the valuation changes with different WACC (discount rate) and terminal growth rate assumptions. Green = undervalued, Red = overvalued.

Scenario Analysis

Bear Case

$204.71

65.0% vs current

• -25% vs analyst consensus
• Terminal growth: 3.3%
• Beta: -5.05

Base Case

$254.20

104.9% vs current

• Analyst consensus
• Terminal growth: 3.8%
• Beta: -4.04

Bull Case

$297.39

139.7% vs current

• +25% vs analyst consensus
• Terminal growth: 4.3%
• Beta: 0.30

Key Assumptions & Drivers✓ Using Analyst Consensus Estimates• Technology Sector

Growth Assumptions (Select Years)

Year 1 Revenue Growth7.65%

Year 3 Revenue Growth4.72%

Year 5 Revenue Growth9.94%

Year 7 Revenue Growth7.47%

Year 10 Revenue Growth3.75%

Terminal Growth Rate3.75%

Margin & Efficiency

Current EBIT Margin20.02%

Terminal EBIT Margin25.00%

Tax Rate24.22%

Historical Capex / Rev4.83%

NWC / Revenue12.64%

Key Drivers: Revenue growth, operating margin expansion, capex efficiency, and working capital management are the primary drivers of cash flow generation. Terminal value assumptions significantly impact final valuation.

Institutional-Grade Methodology

Actual Company Data: Revenue, EBIT, Capex, NWC, Tax Rate, Interest Expense, Beta

Market Assumptions: Risk-free: 4.5% (10Y), MRP: 4.5% (Damodaran 2026), Exit: 28x EV/EBITDA (Technology sector)

This DCF model is for informational purposes only. Projections are based on assumptions that may not materialize. Past performance does not guarantee future results. Consult a financial advisor before making investment decisions.

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