Microsoft Corp. (NASDAQ:MSFT)

The analysis of the financial data over the presented years reveals several notable trends concerning profitability, capital investment, and economic performance.

Net Operating Profit After Taxes (NOPAT)

NOPAT demonstrates a consistent upward trajectory from 46,746 million USD in 2020 to a projected 102,672 million USD in 2025. The growth is particularly marked between 2023 and 2024, where it increases by approximately 27%, indicating improving operational efficiency or increased revenue generation capacity.

Cost of Capital

The cost of capital shows a slight but steady increase from 13.51% in 2020 to 13.85% in 2025. Although this rise is marginal, it reflects a gradual increase in the company’s required rate of return or capital costs, possibly due to market conditions or changes in risk profile.

Invested Capital

Invested capital has expanded significantly, nearly quadrupling from 107,630 million USD in 2020 to an estimated 430,631 million USD in 2025. This substantial increase suggests significant reinvestment into assets or business expansion efforts, which may underpin future growth but also implies increased financial commitment and associated risk.

Economic Profit

Economic profit, which measures value creation beyond the cost of capital, shows a positive trend with fluctuations across the years. It rises from 32,204 million USD in 2020 to a peak of 45,793 million USD in 2021, then experiences a decline in 2022 and 2023 before recovering in the subsequent years to reach 43,026 million USD in 2025. This pattern indicates variability in value creation, possibly affected by changes in operational performance or the cost of capital, but overall the company maintains positive economic profit, signaling consistent generation of shareholder value above the cost of capital.

In summary, the company exhibits strong growth in operating profit and invested capital, alongside a stable upward trend in cost of capital. Economic profit remains positive throughout the period, albeit with some fluctuations, illustrating effective value generation despite increasing capital investment and costs. These patterns suggest a firm focused on expansion and operational enhancement while maintaining financial discipline to ensure value creation.

Net Income

The net income demonstrates a consistent upward trend over the analyzed periods. Starting at 44,281 million US dollars in mid-2020, it increased to 61,271 million by mid-2021, marking significant growth. This positive trajectory continued in subsequent years, reaching 72,738 million in mid-2022 and slightly declining to 72,361 million in mid-2023. However, the figure rebounded strongly, climbing to 88,136 million in mid-2024 and further to 101,832 million in mid-2025, indicating robust profitability improvement over time.

Net Operating Profit After Taxes (NOPAT)

NOPAT values show a steady increase overall, reflecting operational efficiency and sustainable earnings. Beginning at 46,746 million US dollars in mid-2020, it rose consistently to 65,443 million in mid-2021 and then to 71,024 million by mid-2022. The measure remained relatively stable into mid-2023 at 71,055 million, followed by a significant increase to 90,364 million in mid-2024 and 102,672 million in mid-2025. This pattern suggests effective operational management and growing core profitability.

Overall Analysis

Both net income and NOPAT demonstrate strong growth trajectories from 2020 through 2025. The steady increases, with minor fluctuations, reveal enhanced profitability and operational performance. The convergence of net income and NOPAT rising sharply in later years suggests improved tax efficiency and successful conversion of operating profit into net earnings. The data indicates a positive financial momentum and operational resilience sustained across multiple fiscal years.

Provision for Income Taxes

The provision for income taxes shows a consistent upward trend over the six-year period. Starting from 8,755 million USD in 2020, it increases each year, reaching 21,795 million USD by 2025. Notably, the growth rate accelerates notably from 2021 onwards, with a more pronounced increase observed between 2022 and 2023, where the provision rises from 10,978 million USD to 16,950 million USD.

Cash Operating Taxes

Cash operating taxes also exhibit a significant upward trajectory, beginning at 8,771 million USD in 2020 and increasing steadily to 29,037 million USD in 2025. The most notable increase occurs between 2021 and 2022, where the cash operating taxes jump from 9,821 million USD to 16,637 million USD, and continue to climb in subsequent years, reaching nearly 30 billion USD by 2025.

Comparative Insights

While both provision for income taxes and cash operating taxes increase substantially over the period, cash operating taxes consistently exceed the provision for income taxes each year, with the gap widening over time. This suggests that actual cash payments related to taxes are growing at a faster pace than the accrued tax expense, indicating potential timing differences or changes in tax payment structures. The acceleration in increases for both metrics between 2022 and 2023 aligns with a period of notable growth in tax-related outflows.

Total reported debt & leases

Over the six-year period, total reported debt and leases display a generally upward trend. Starting at $82,110 million in mid-2020, the figure remains relatively stable through mid-2021 and 2022, with a slight dip in 2022 to $78,400 million. From mid-2023 onward, there is a noticeable increase, rising to $97,852 million by mid-2024 and reaching $112,184 million by mid-2025. This indicates increased financial leverage or borrowing activity, particularly in the last two years.

Stockholders’ equity

Stockholders’ equity consistently expands throughout the entire timeframe. Beginning at $118,304 million in June 2020, it shows steady growth each year, accelerating after mid-2022. Equity reaches $141,988 million in 2021, $166,542 million in 2022, and experiences a stronger rise to $206,223 million in 2023. By 2024 and 2025, the growth becomes more pronounced, escalating to $268,477 million and $343,479 million respectively. This reflects substantial accumulation of retained earnings or equity injections over the period, strengthening the company's financial foundation.

Invested capital

Invested capital demonstrates a strong and consistent upward trajectory across the six years. Starting at $107,630 million in 2020, it grows considerably each year, surpassing $140 billion in 2021 and reaching $194,094 million in 2022. The increase accelerates over the ensuing years, hitting $247,490 million in 2023, $351,567 million in 2024, and culminating at $430,631 million in 2025. This rise indicates expanding total capital employed in the business, which includes equity and debt, reflecting an increase in the scale of operations or investments.

Overall trends and insights

The data reveal a pattern of expanding financial scale coupled with increased leverage. While stockholders’ equity grows substantially, indicating enhanced net worth and reinvested earnings, total debt and leases also increase, particularly in the latter years, implying a greater use of borrowed funds. Invested capital's growth outpaces both debt and equity individually, signaling that the company is significantly scaling up its capital base. This expansion may support increased operational capabilities or strategic investments. The balance between rising equity and rising debt suggests an approach that combines internal funding strength with external financing to fuel growth.

The financial data reveals several distinct trends over the period under review. The economic profit exhibited an initial increase followed by fluctuations. It peaked in the year ended June 30, 2021, with a value of 45,793 million US dollars, then declined in the subsequent years before rising again toward the final year, reaching 43,026 million US dollars.

The invested capital shows a consistent upward trajectory throughout the period. The amount more than quadrupled from 107,630 million US dollars in the year ended June 30, 2020, to 430,631 million US dollars by June 30, 2025, indicating substantial expansion or increased asset investment by the company over these years.

The economic spread ratio, which measures the return on invested capital relative to cost, shows a steady downward trend. It started at 29.92% in 2020, incrementally rose to 31.88% in 2021, and then declined consistently each year, reaching 9.99% by 2025. This decline suggests diminishing returns on additional capital invested or an increase in the cost of capital impacting profitability.

Economic Profit

Increased initially, peaking in mid-2021, followed by a decrease, then a partial recovery in the last reported year.

Invested Capital

Steadily increased over the observed period, indicating significant growth in asset base or investment levels.

Economic Spread Ratio

Experienced a notable decline after 2021, suggesting decreasing efficiency in generating returns above the cost of capital despite rising invested capital.

Overall, the data indicates that while the company has been increasing its capital base significantly, the efficiency and profitability relative to invested capital have weakened over time. This could point to the need for strategic evaluation of investment returns and capital allocation to sustain or improve economic profitability.

The financial data over the analyzed periods reveal distinct trends in economic profit, adjusted revenue, and economic profit margin. Adjusted revenue consistently increased from 144,989 million US dollars in 2020 to 288,805 million US dollars projected for 2025, demonstrating a strong upward growth trajectory. This steady revenue growth reflects an expanding business with increasing sales or service revenues over time.

Economic profit also shows significant growth, moving from 32,204 million US dollars in 2020 to a projected 43,026 million US dollars in 2025. Although there is some fluctuation with a peak in 2021 followed by a decline in subsequent years before recovering, the long-term trend indicates a positive increase in economic profit, implying improving profitability beyond the cost of capital.

In contrast, the economic profit margin, which represents economic profit as a percentage of adjusted revenue, exhibits a declining trend. It starts at 22.21% in 2020, rising slightly to 26.46% in 2021, but then decreases steadily to an estimated 14.9% in 2025. This decline suggests that while total economic profit is increasing, it is not growing as rapidly as revenue. Consequently, profitability relative to revenue is diminishing, which might indicate increasing costs, investments, or competitive pressures affecting margin sustainability.

Adjusted Revenue

Continuous year-over-year increase, nearly doubling from 2020 to the projected figure in 2025.

Economic Profit

Overall growth with fluctuations; peak in 2021 and dip thereafter, followed by gradual improvement towards 2025.

Economic Profit Margin

Declining trend post-2021, indicating lower economic profit return relative to revenue despite absolute profit growth.

In summary, the company exhibits robust revenue growth and increasing absolute economic profit; however, decreasing economic profit margins call attention to the need for closer evaluation of cost management and operational efficiency in order to sustain profitability ratios over time.