Microsoft Corp. (NASDAQ:MSFT)

Net Operating Profit After Taxes (NOPAT)

NOPAT exhibits a consistent upward trajectory from 46,746 million USD in 2020 to 102,672 million USD projected in 2025. The most significant increase occurs between 2023 and 2024, with a rise from 71,055 million USD to 90,364 million USD, indicating strong profitability growth during this period.

Cost of Capital

The cost of capital shows a gradual increase over the analyzed years, moving from 13.31% in 2020 to a projected 13.64% in 2025. The incremental rises are modest yet consistent, reflecting a slowly increasing cost to finance invested capital.

Invested Capital

Invested capital demonstrates significant growth throughout the period, expanding from 107,630 million USD in 2020 to an estimated 430,631 million USD in 2025. This indicates substantial scaling of asset base or investment levels, particularly notable between 2023 and 2024 where invested capital rises sharply by over 100,000 million USD.

Economic Profit

Economic profit rises from 32,422 million USD in 2020 to an estimated 43,928 million USD in 2025. While economic profit generally increases, there is a noticeable dip in 2023, falling to 37,411 million USD from 44,781 million USD in the previous year. This suggests a temporary decline in value creation despite the rising NOPAT and invested capital. The upward trend resumes thereafter, implying a recovery in profitability relative to capital costs.

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 indicates several important trends regarding the company's economic profitability and capital investment over the six-year period from June 2020 to June 2025.

Economic Profit

The economic profit shows a fluctuating pattern. Starting at 32,422 million US$ in 2020, it increased significantly to 46,090 million US$ in 2021. Subsequently, it decreased slightly to 44,781 million US$ in 2022, followed by a more marked decline to 37,411 million US$ in 2023. After this dip, economic profit recovered and rose again to 42,463 million US$ in 2024 and further to 43,928 million US$ in 2025. Overall, while the economic profit ends higher than the starting point, it reflects a volatility with a peak in 2021 and trough in 2023.

Invested Capital

The invested capital shows a strong and consistent upward trend throughout the entire period. It grew from 107,630 million US$ in 2020 to 143,637 million US$ in 2021, then increased more sharply to 194,094 million US$ in 2022 and continued to rise significantly to 247,490 million US$ in 2023. The growth accelerated further, reaching 351,567 million US$ in 2024 and culminating at 430,631 million US$ in 2025. This indicates a substantial and continuous increase in the capital base employed by the company.

Economic Spread Ratio

The economic spread ratio displays a declining trend over the period. Initially high at 30.12% in 2020, the ratio improved slightly to 32.09% in 2021, the highest point observed. From 2022 onwards, there is a steady decrease: dropping to 23.07% in 2022, then falling sharply to 15.12% in 2023, with further reductions to 12.08% in 2024 and 10.2% in 2025. This downward trend suggests a diminishing return on invested capital relative to the cost of capital or benchmark used to calculate this ratio.

In summary, while the company's economic profit exhibits variability with an overall upward movement after a dip, the invested capital displays robust and sustained growth. However, the economic spread ratio's marked decline highlights a decreasing efficiency in generating economic profit from the capital invested, signaling that the company is experiencing diminishing returns on incremental investments over time.

The financial data reveals several important trends in the company's economic profit, adjusted revenue, and economic profit margin over a six-year period.

Economic Profit

Economic profit has generally increased from 32,422 million US dollars in mid-2020 to 43,928 million US dollars in mid-2025. There was a significant rise from 2020 to 2021, peaking at 46,090 million US dollars. However, the profit experienced a decline in mid-2023 to 37,411 million US dollars before recovering in the subsequent years.

Adjusted Revenue

Adjusted revenue shows a consistent upward trajectory throughout the entire period. Beginning at 144,989 million US dollars in mid-2020, it has expanded steadily each year, reaching 288,805 million US dollars by mid-2025. This indicates robust growth in the company’s revenue base without any observed contractions.

Economic Profit Margin

The economic profit margin has demonstrated a declining trend over the years. It started at 22.36% in mid-2020 and increased to a peak of 26.63% by mid-2021. Post-2021, the margin has been gradually decreasing, falling to 15.21% by mid-2025. This suggests that despite increasing revenues and economic profit, the efficiency in generating economic profit relative to revenue has diminished.

Overall, the data indicates strong revenue growth and an increasing absolute economic profit, although the profitability margin relative to revenue is weakening over time. This may imply rising costs, increased investment, or competitive pressures affecting profit efficiency. Continuous monitoring and further analysis would be advisable to understand the underlying causes for margin compression despite revenue gains.