Microsoft Corp. (NASDAQ:MSFT)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes exhibited a consistent upward trend over the analyzed period. It rose from 36,908 million USD in 2019 to 90,364 million USD by 2024. This indicates a strong improvement in profitability, with the rate of increase accelerating particularly between 2023 and 2024.

Cost of Capital

The cost of capital showed a gradual increase from 12.89% in 2019 to 13.49% in 2024. This steady rise suggests a slightly increasing hurdle rate for investments, which may reflect changes in market conditions or company-specific risk factors.

Invested Capital

Invested capital expanded significantly during the period, growing from 96,412 million USD in 2019 to 351,567 million USD in 2024. The growth accelerated notably after 2020, more than tripling over five years, which indicates substantial capital deployment possibly aimed at supporting business growth or asset acquisition.

Economic Profit

Economic profit increased overall from 24,481 million USD in 2019 to a peak of 46,285 million USD in 2021, before experiencing a dip to 37,751 million USD in 2023 and then recovering to 42,947 million USD in 2024. The initial rise reflects improved value generation above the cost of capital, while the dip suggests some pressure on economic profitability despite rising NOPAT and invested capital.

Summary

The financial performance exhibits strong growth in operating profitability alongside a steadily increasing cost of capital and a significant expansion in invested capital. While NOPAT showed robust gains, the economic profit reveals some volatility, implying that although the company is generating higher operating earnings, the rate of return on invested capital may have faced some challenges in certain years. Overall, the trends suggest effective capital utilization with increasing scale but highlight the need to monitor capital efficiency amidst rising invested capital and cost of capital.

Net Income Trend

The net income exhibits a generally upward trajectory over the observed period, starting at 39,240 million US dollars in mid-2019 and rising to 88,136 million US dollars by mid-2024. There is a consistent year-over-year increase, with the most significant growth appearing between mid-2020 and mid-2021, where net income increased from 44,281 million to 61,271 million US dollars. Although the rise continues thereafter, there is a slight decline from 72,738 million in mid-2022 to 72,361 million in mid-2023 before surging again in the next year.

Net Operating Profit After Taxes (NOPAT) Trend

NOPAT follows a similar pattern to net income, beginning at 36,908 million US dollars in mid-2019 and reaching 90,364 million US dollars in mid-2024. There is a notable increase between mid-2019 and mid-2021, with NOPAT increasing to 65,443 million US dollars. Growth thereafter is steadier, with minor fluctuations and a relatively flat reading between mid-2022 and mid-2023 (71,024 million to 71,055 million US dollars) before a substantial increase in the final reported year.

Comparison and Insights

Both net income and NOPAT demonstrate strong growth, reflecting improving profitability over the period. The close alignment in their trends suggests effective tax management and operational efficiency. The plateau observed in both metrics between mid-2022 and mid-2023 may indicate a period of stabilization or increased operational challenges, which subsequently were overcome, resulting in renewed growth in the final year. Overall, the financial data points to an expanding and increasingly profitable operational base.

The analysis of the provided financial data reveals notable trends in both the provision for income taxes and cash operating taxes over the six-year period ending June 30, 2024.

Provision for Income Taxes

The provision for income taxes shows a generally increasing trend, rising from $4,448 million in 2019 to $19,651 million in 2024. Between 2019 and 2020, there was nearly a doubling in the provision. Subsequent years also saw incremental increases, with the largest absolute growth occurring in the last two years of the period examined, suggesting increasing taxable income or changes in tax rates or policies affecting the company.

Cash Operating Taxes

Cash operating taxes display more volatility but a clear upward trajectory overall. The amount decreased from $10,807 million in 2019 to $8,771 million in 2020, before steadily increasing to reach $24,499 million in 2024. This substantial growth, especially from 2021 onwards, could imply higher cash tax payments, possibly due to improved profitability or changes in the timing of tax payments. The sharp increase between 2021 and 2023 is particularly notable.

Comparative Insights

Both tax-related figures have demonstrated significant growth over the period, with cash operating taxes consistently exceeding the provision for income taxes. The divergence and increasing gap between these two metrics might indicate differences in tax accruals versus actual payments, or adjustments related to deferred tax assets and liabilities.

Overall, the data suggests that the entity is experiencing higher tax obligations, reflecting either increased earnings, adjustments in tax strategy or regulatory changes affecting tax liabilities. The upward trend in both provisions and cash taxes points towards expanding operations or profitability, necessitating close monitoring of tax planning and cash flow management related to tax payments.

The analysis of the financial data reveals the following trends over the period from mid-2019 to mid-2024:

Total Reported Debt & Leases

The total reported debt and leases decreased slightly from 86,455 million USD in 2019 to 78,400 million USD in 2022. However, there was an increase in the last two years, reaching 97,852 million USD by mid-2024. This indicates a relatively stable debt level initially, followed by a notable rise in debt and lease obligations towards the end of the period.

Stockholders’ Equity

Stockholders’ equity showed consistent and substantial growth throughout the entire period. Starting at 102,330 million USD in 2019, it rose steadily each year, nearly doubling by mid-2023 to 206,223 million USD and reaching 268,477 million USD by mid-2024. This upward trend reflects increasing net assets attributed to shareholders and suggests strong retained earnings or other equity increases.

Invested Capital

Invested capital experienced a pronounced upward trajectory, rising from 96,412 million USD in 2019 to 351,567 million USD by mid-2024. The increase accelerated particularly after 2020, indicating expanded financial resources invested in the business, which may include higher equity and debt financing. The growth rate surpassed that of debt alone, suggesting equity growth has been a significant component of invested capital expansion.

Overall, the financial data points to a strategy of increasing invested capital primarily driven by significant growth in stockholders’ equity, accompanied by moderate fluctuations in debt levels until a sharp rise in the last recorded year. This pattern may imply a balanced approach toward financing with an increasing reliance on equity, supported by rising net assets, while debt levels show recent growth potentially aimed at supporting expansion or investments.

The analysis of the financial data over the six-year period reveals several notable trends regarding the economic profit, invested capital, and economic spread ratio.

Economic Profit

Economic profit shows a general upward trend from 2019 to 2024, increasing from 24,481 million US dollars in 2019 to 42,947 million US dollars in 2024. The profit peaked in 2021 at 46,285 million US dollars, followed by a decline in 2022 and 2023, before partially recovering in 2024. This pattern indicates a period of strong growth up to 2021, with some challenges or increasing costs impacting profits in the subsequent two years and a modest rebound in the most recent year.

Invested Capital

Invested capital demonstrates a consistent and substantial growth trajectory throughout the entire period. It increased steadily from 96,412 million US dollars in 2019 to 351,567 million US dollars in 2024. This more than threefold increase suggests significant additional investments or asset acquisitions, reflecting an aggressive capital expansion strategy.

Economic Spread Ratio

The economic spread ratio, which often indicates the return on invested capital relative to cost, shows a declining trend over the same period. It peaked at 32.22% in 2021, after which it experienced a marked decrease to 12.22% by 2024. This decline suggests diminishing returns on the expanding capital base, potentially indicating that additional investments are yielding progressively lower incremental returns or that costs are rising faster than profits.

Overall, while economic profit has increased over time, the rapid expansion of invested capital and the declining economic spread ratio imply that the efficiency or profitability of investments has weakened. The company appears to be investing heavily, but with decreasing return rates on those investments, a factor warranting close monitoring to ensure sustainable growth and capital allocation effectiveness.

Economic Profit

The economic profit exhibited an overall upward trend from 2019 to 2024, with values rising from 24,481 million US dollars in 2019 to 42,947 million US dollars in 2024. Notably, there was a significant increase from 2019 through 2021, peaking at 46,285 million in 2021. However, a decline followed in 2022 and 2023, dropping to 37,751 million, before recovering somewhat in 2024.

Adjusted Revenue

Adjusted revenue demonstrated a consistent and substantial growth throughout the entire period. Starting at 130,329 million US dollars in 2019, the figure steadily increased every year to reach 251,493 million US dollars by 2024. The growth was particularly strong post-2020, with revenue nearly doubling over the five-year span.

Economic Profit Margin

The economic profit margin percentage presented notable fluctuations over the years. It increased from 18.78% in 2019 to a peak of 26.75% in 2021, indicating improved efficiency and profitability relative to revenue. After 2021, the margin declined each year, falling to 17.08% in 2024, which is below the 2019 level. This decline suggests that despite revenue growth, profitability relative to revenue diminished in the latter years.