Stock Analysis on Net
Stock Analysis on Net

Microsoft Corp. (NASDAQ:MSFT)

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Common-Size Income Statement

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Microsoft Corp., common-size consolidated income statement

Microsoft Excel
12 months ended: Jun 30, 2024 Jun 30, 2023 Jun 30, 2022 Jun 30, 2021 Jun 30, 2020 Jun 30, 2019
Product
Service and other
Revenue
Product
Service and other
Cost of revenue
Gross margin
Research and development
Sales and marketing
General and administrative
Operating income
Interest and dividends income
Interest expense
Net recognized gains (losses) on investments
Net gains (losses) on derivatives
Net gains (losses) on foreign currency remeasurements
Other, net
Other income (expense), net
Income before income taxes
Provision for income taxes
Net income

Based on: 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), 10-K (reporting date: 2019-06-30).

Revenue Composition
There is a clear shift in revenue sources over the periods. The contribution from Products as a percentage of total revenue has steadily declined from 52.5% in 2019 to 26.42% in 2024. Conversely, Services and other revenues have increased correspondingly from 47.5% in 2019 up to 73.58% in 2024. This indicates a strategic transition toward service-oriented business activities.
Cost of Revenue
The cost of revenue as a percentage of total revenue has shown a moderate decline from 34.1% in 2019 to 30.24% in 2024, suggesting modest improvements in cost efficiency or changes in product and service mix favoring higher margin offerings.
Gross Margin
Gross margin has gradually risen from 65.9% in 2019 to 69.76% in 2024. This upward trend aligns with the increase in service revenue, which typically carries higher margins, thereby enhancing overall profitability at the gross level.
Operating Expenses
Research and Development
R&D expenses relative to revenue have remained fairly stable, fluctuating slightly around 12% to 13%, reflecting sustained investment in innovation and product development.
Sales and Marketing
There is a consistent decrease in sales and marketing expenses as a percentage of revenue from 14.47% in 2019 down to 9.98% in 2024, indicating improved marketing efficiency or a shift in promotional strategies.
General and Administrative
These expenses have remained relatively steady, mostly between approximately 3% and 3.6%, with minor fluctuations noted.
Operating Income
Operating income as a percentage of revenue has shown a steady increase over time, growing from 34.14% in 2019 to 44.64% in 2024. This growth is driven by a combination of expanding gross margins and more controlled operating expenses.
Financial Income and Expenses
Interest and Dividends Income
This has gradually declined from 2.19% to around 1.29%, possibly due to lower returns on investments or changes in the investment portfolio.
Interest Expense
Interest expense has decreased from 2.13% in 2019 to a low of 0.93% in 2023 before increasing slightly to 1.2% in 2024, suggesting variable debt levels or changes in interest rates.
Other Income (Expense) Items
Other net income components have fluctuated but generally remained minimal as a percentage of revenue, with some volatility observed in net gains/losses on investments and derivatives. Notably, other income (expense), net shifted from a small positive position to a negative 0.67% in 2024.
Income Before Taxes and Provision for Taxes
Income before taxes has generally increased from 34.72% to 43.97%, consistent with improving profitability. However, the provision for income taxes has also increased from 3.53% in 2019 to approximately 8% in the more recent periods, representing higher effective tax rates or increased pre-tax profitability.
Net Income
Net income as a percentage of revenue has risen from 31.18% in 2019 to 35.96% in 2024, reflecting overall improvements in operational efficiency, margin expansion, and effective tax management despite increased tax provisions. There is a slight dip noted in 2023 but recovery in 2024.