Common-Size Income Statement
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- Cash Flow Statement
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Geographic Areas
- Price to FCFE (P/FCFE)
- Capital Asset Pricing Model (CAPM)
- Dividend Discount Model (DDM)
- Selected Financial Data since 2005
- Price to Earnings (P/E) since 2005
- Price to Operating Profit (P/OP) since 2005
- Analysis of Revenues
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Microsoft Corp., common-size consolidated income statement
Based on: 10-K (reporting date: 2025-06-30), 10-K (reporting date: 2024-06-30), 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30).
- Revenue Composition
- There is a clear shift in revenue composition over the periods. The share of revenue from products has steadily decreased from 47.58% in 2020 to 22.7% in 2025, indicating a declining reliance on product sales. Conversely, service and other revenues have increased significantly from 52.42% to 77.3%, reflecting a strategic shift towards service-oriented offerings.
- Cost and Margin Trends
- Product costs as a percentage of revenue have improved, moving from -11.2% in 2020 to -4.79% in 2025, indicating better cost control or lower product-related expenses. Service costs have increased in absolute terms but decreased relative to revenue, changing from -21.02% to -26.38%. Overall cost of revenue remains relatively stable, fluctuating slightly around the 31% mark. This stability supports the consistent gross margins, which have largely remained above 67%, peaking at 69.76% in 2024.
- Operating Expenses
- Research and development expenses have modestly decreased from -13.47% to -11.53% of revenue, suggesting increased efficiency or cost optimization in innovation activities. Sales and marketing expenses have also contracted notably from -13.7% to -9.11%, reinforcing effective cost management in these areas. General and administrative costs show a slight decline from -3.57% to -2.56%, contributing to overall expense control.
- Profitability Metrics
- Operating income has shown a strong upward trend from 37.03% in 2020 to 45.62% in 2025, indicating enhanced operational efficiency and profitability. Income before taxes follows a similar trajectory, rising from 37.08% to approximately 43.88% over the period. Net income margins have improved over time as well, increasing from 30.96% to 36.15%, albeit with some fluctuation, particularly a dip in 2023.
- Investment and Financial Items
- Interest and dividends income has declined from 1.87% to 0.94%, while interest expenses decreased slightly from -1.81% to -0.85%, signaling a reduction in both investment income and debt costs. Gains and losses on investments, derivatives, and foreign currency remeasurements exhibit volatility but are relatively minor in impact. Other income (expense), net trends downward with increasing negative contributions in later years, most notably reaching -1.74% in 2025.
- Taxation
- The provision for income taxes shows variability, beginning at -6.12% of revenue, dipping to -5.54%, and then increasing to around -8% in 2023 and 2024, before slightly decreasing to -7.74% in 2025. This fluctuation may reflect changes in tax rates or taxable income structures.
- Summary Insights
- The data reflects a strategic pivot from product-based revenue to service-driven revenue, accompanied by disciplined cost control across product, service, and operating expense lines. This has resulted in sustained or improved profitability margins. While investment income and other financial income sources have diminished, the company has managed to reduce interest expenses. Tax expenses fluctuate but generally correspond to higher profitability levels. Overall, the trends suggest enhanced operational efficiency and a successful repositioning towards higher-margin service offerings.