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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

Microsoft Corp., economic profit calculation

US$ in millions

12 months ended:	Jun 30, 2024	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019
Net operating profit after taxes (NOPAT)¹	90,364)	71,055)	71,024)	65,443)	46,746)	36,908)
Cost of capital²	13.51%	13.48%	13.41%	13.36%	13.20%	12.91%
Invested capital³	351,567)	247,490)	194,094)	143,637)	107,630)	96,412)

Economic profit⁴	42,854)	37,686)	44,995)	46,248)	32,538)	24,457)

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).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2024 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 90,364 – 13.51% × 351,567 = 42,854

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Microsoft Corp., NOPAT calculation

US$ in millions

12 months ended:	Jun 30, 2024	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019
Net income	88,136)	72,361)	72,738)	61,271)	44,281)	39,240)
Deferred income tax expense (benefit)¹	(4,738)	(6,059)	(5,702)	(150)	11)	(6,463)
Increase (decrease) in allowance for doubtful accounts²	180)	17)	(118)	(37)	377)	34)
Increase (decrease) in unearned revenue³	6,371)	5,405)	4,267)	4,961)	1,974)	4,486)
Increase (decrease) in equity equivalents⁴	1,813)	(637)	(1,553)	4,774)	2,362)	(1,943)
Interest expense	2,935)	1,968)	2,063)	2,346)	2,591)	2,686)
Interest expense, operating lease liability⁵	630)	439)	288)	255)	251)	231)
Adjusted interest expense	3,565)	2,407)	2,351)	2,601)	2,842)	2,917)
Tax benefit of interest expense⁶	(749)	(505)	(494)	(546)	(597)	(613)
Adjusted interest expense, after taxes⁷	2,816)	1,902)	1,857)	2,055)	2,245)	2,305)
(Gain) loss on marketable securities	118)	(260)	(461)	(1,232)	(32)	(648)
Interest and dividends income	(3,157)	(2,994)	(2,094)	(2,131)	(2,680)	(2,762)
Investment income, before taxes	(3,039)	(3,254)	(2,555)	(3,363)	(2,712)	(3,410)
Tax expense (benefit) of investment income⁸	638)	683)	537)	706)	570)	716)
Investment income, after taxes⁹	(2,401)	(2,571)	(2,018)	(2,657)	(2,142)	(2,694)
Net operating profit after taxes (NOPAT)	90,364)	71,055)	71,024)	65,443)	46,746)	36,908)

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).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowance for doubtful accounts.

³ Addition of increase (decrease) in unearned revenue.

⁴ Addition of increase (decrease) in equity equivalents to net income.

⁵ 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 19,077 × 3.30% = 630

⁶ 2024 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 3,565 × 21.00% = 749

⁷ Addition of after taxes interest expense to net income.

⁸ 2024 Calculation
Tax expense (benefit) of investment income = Investment income, before tax × Statutory income tax rate
= 3,039 × 21.00% = 638

⁹ Elimination of after taxes investment income.

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.

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Microsoft Corp., cash operating taxes calculation

US$ in millions

12 months ended:	Jun 30, 2024	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019
Provision for income taxes	19,651)	16,950)	10,978)	9,831)	8,755)	4,448)
Less: Deferred income tax expense (benefit)	(4,738)	(6,059)	(5,702)	(150)	11)	(6,463)
Add: Tax savings from interest expense	749)	505)	494)	546)	597)	613)
Less: Tax imposed on investment income	638)	683)	537)	706)	570)	716)
Cash operating taxes	24,499)	22,831)	16,637)	9,821)	8,771)	10,807)

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).

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.

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Microsoft Corp., invested capital calculation (financing approach)

US$ in millions

	Jun 30, 2024	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019
Short-term debt	6,693)	—)	—)	—)	—)	—)
Current portion of long-term debt	2,249)	5,247)	2,749)	8,072)	3,749)	5,516)
Current finance lease liabilities	2,349)	1,197)	1,060)	791)	540)	317)
Long-term debt, excluding current portion	42,688)	41,990)	47,032)	50,074)	59,578)	66,662)
Long-term finance lease liabilities	24,796)	15,870)	13,842)	11,750)	8,956)	6,257)
Operating lease liability¹	19,077)	15,137)	13,717)	11,591)	9,287)	7,703)
Total reported debt & leases	97,852)	79,441)	78,400)	82,278)	82,110)	86,455)
Stockholders’ equity	268,477)	206,223)	166,542)	141,988)	118,304)	102,330)
Net deferred tax (assets) liabilities²	(19,652)	(19,730)	(13,285)	(6,983)	(6,201)	(7,303)
Allowance for doubtful accounts³	830)	650)	633)	751)	788)	411)
Unearned revenue⁴	60,184)	53,813)	48,408)	44,141)	39,180)	37,206)
Equity equivalents⁵	41,362)	34,733)	35,756)	37,909)	33,767)	30,314)
Accumulated other comprehensive (income) loss, net of tax⁶	5,590)	6,343)	4,678)	(1,822)	(3,186)	340)
Adjusted stockholders’ equity	315,429)	247,299)	206,976)	178,075)	148,885)	132,984)
Investments⁷	(61,714)	(79,250)	(91,282)	(116,716)	(123,365)	(123,027)
Invested capital	351,567)	247,490)	194,094)	143,637)	107,630)	96,412)

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).

¹ Addition of capitalized operating leases.

² Elimination of deferred taxes from assets and liabilities. See details »

³ Addition of allowance for doubtful accounts receivable.

⁴ Addition of unearned revenue.

⁵ Addition of equity equivalents to stockholders’ equity.

⁶ Removal of accumulated other comprehensive income.

⁷ Subtraction of investments.

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.

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Microsoft Corp., cost of capital calculations

Jun 30, 2024

	Capital (fair value)¹	Weights					Cost of capital
Equity²	3,143,581)	3,143,581)	÷	3,238,796)	=	0.97	0.97	×	13.82%	=	13.42%
Debt and finance lease liabilities³	76,138)	76,138)	÷	3,238,796)	=	0.02	0.02	×	4.43% × (1 – 21.00%)	=	0.08%
Operating lease liability⁴	19,077)	19,077)	÷	3,238,796)	=	0.01	0.01	×	3.30% × (1 – 21.00%)	=	0.02%
Total:	3,238,796)					1.00					13.51%

Based on: 10-K (reporting date: 2024-06-30).

¹ US$ in millions

² Equity. See details »

³ Debt and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Jun 30, 2023

	Capital (fair value)¹	Weights					Cost of capital
Equity²	2,457,171)	2,457,171)	÷	2,535,575)	=	0.97	0.97	×	13.82%	=	13.40%
Debt and finance lease liabilities³	63,267)	63,267)	÷	2,535,575)	=	0.02	0.02	×	3.75% × (1 – 21.00%)	=	0.07%
Operating lease liability⁴	15,137)	15,137)	÷	2,535,575)	=	0.01	0.01	×	2.90% × (1 – 21.00%)	=	0.01%
Total:	2,535,575)					1.00					13.48%

Based on: 10-K (reporting date: 2023-06-30).

¹ US$ in millions

² Equity. See details »

³ Debt and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Jun 30, 2022

	Capital (fair value)¹	Weights					Cost of capital
Equity²	2,061,436)	2,061,436)	÷	2,140,955)	=	0.96	0.96	×	13.82%	=	13.31%
Debt and finance lease liabilities³	65,802)	65,802)	÷	2,140,955)	=	0.03	0.03	×	3.73% × (1 – 21.00%)	=	0.09%
Operating lease liability⁴	13,717)	13,717)	÷	2,140,955)	=	0.01	0.01	×	2.10% × (1 – 21.00%)	=	0.01%
Total:	2,140,955)					1.00					13.41%

Based on: 10-K (reporting date: 2022-06-30).

¹ US$ in millions

² Equity. See details »

³ Debt and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Jun 30, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	2,153,016)	2,153,016)	÷	2,247,148)	=	0.96	0.96	×	13.82%	=	13.24%
Debt and finance lease liabilities³	82,541)	82,541)	÷	2,247,148)	=	0.04	0.04	×	3.83% × (1 – 21.00%)	=	0.11%
Operating lease liability⁴	11,591)	11,591)	÷	2,247,148)	=	0.01	0.01	×	2.20% × (1 – 21.00%)	=	0.01%
Total:	2,247,148)					1.00					13.36%

Based on: 10-K (reporting date: 2021-06-30).

¹ US$ in millions

² Equity. See details »

³ Debt and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Jun 30, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	1,551,445)	1,551,445)	÷	1,647,328)	=	0.94	0.94	×	13.82%	=	13.02%
Debt and finance lease liabilities³	86,596)	86,596)	÷	1,647,328)	=	0.05	0.05	×	4.09% × (1 – 21.00%)	=	0.17%
Operating lease liability⁴	9,287)	9,287)	÷	1,647,328)	=	0.01	0.01	×	2.70% × (1 – 21.00%)	=	0.01%
Total:	1,647,328)					1.00					13.20%

Based on: 10-K (reporting date: 2020-06-30).

¹ US$ in millions

² Equity. See details »

³ Debt and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Jun 30, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	1,054,145)	1,054,145)	÷	1,147,322)	=	0.92	0.92	×	13.82%	=	12.70%
Debt and finance lease liabilities³	85,474)	85,474)	÷	1,147,322)	=	0.07	0.07	×	3.36% × (1 – 21.00%)	=	0.20%
Operating lease liability⁴	7,703)	7,703)	÷	1,147,322)	=	0.01	0.01	×	3.00% × (1 – 21.00%)	=	0.02%
Total:	1,147,322)					1.00					12.91%

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

¹ US$ in millions

² Equity. See details »

³ Debt and finance lease liabilities. See details »

⁴ Operating lease liability. See details »

Microsoft Corp., economic spread ratio calculation, comparison to benchmarks

	Jun 30, 2024	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019
Selected Financial Data (US$ in millions)
Economic profit¹	42,854)	37,686)	44,995)	46,248)	32,538)	24,457)
Invested capital²	351,567)	247,490)	194,094)	143,637)	107,630)	96,412)
Performance Ratio
Economic spread ratio³	12.19%	15.23%	23.18%	32.20%	30.23%	25.37%
Benchmarks
Economic Spread Ratio, Competitors⁴
Accenture PLC	3.82%	4.60%	7.46%	9.29%	9.87%	8.61%
Adobe Inc.	4.09%	4.32%	9.77%	12.17%	4.44%	2.55%
Cadence Design Systems Inc.	-0.40%	9.71%	9.10%	9.33%	10.14%	—
CrowdStrike Holdings Inc.	-4.38%	-0.71%	-3.97%	-6.24%	4.62%	—
Fair Isaac Corp.	24.70%	18.25%	18.02%	14.03%	2.85%	0.82%
International Business Machines Corp.	-6.37%	-2.43%	-10.23%	-5.18%	-4.84%	—
Intuit Inc.	-5.39%	-7.45%	-6.36%	1.32%	4.69%	18.32%
Oracle Corp.	-1.69%	-2.70%	-2.26%	5.83%	0.20%	—
Palantir Technologies Inc.	-19.30%	-16.00%	-39.67%	-47.15%	-87.15%	—
Palo Alto Networks Inc.	7.60%	13.64%	5.56%	-3.13%	-4.10%	-0.94%
Salesforce Inc.	-11.02%	-13.29%	-10.87%	-8.58%	-11.60%	—
ServiceNow Inc.	8.42%	7.71%	3.18%	4.39%	6.02%	—
Synopsys Inc.	-5.04%	-4.33%	2.25%	-3.77%	-3.59%	-6.57%
Workday Inc.	-9.03%	-15.33%	-10.10%	-15.36%	-18.84%	—

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).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 42,854 ÷ 351,567 = 12.19%

⁴ Click competitor name to see calculations.

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Microsoft Corp., economic profit margin calculation, comparison to benchmarks

	Jun 30, 2024	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021	Jun 30, 2020	Jun 30, 2019
Selected Financial Data (US$ in millions)
Economic profit¹	42,854)	37,686)	44,995)	46,248)	32,538)	24,457)

Revenue	245,122)	211,915)	198,270)	168,088)	143,015)	125,843)
Add: Increase (decrease) in unearned revenue	6,371)	5,405)	4,267)	4,961)	1,974)	4,486)
Adjusted revenue	251,493)	217,320)	202,537)	173,049)	144,989)	130,329)
Performance Ratio
Economic profit margin²	17.04%	17.34%	22.22%	26.73%	22.44%	18.77%
Benchmarks
Economic Profit Margin, Competitors³
Accenture PLC	2.16%	2.37%	3.59%	4.77%	5.02%	3.98%
Adobe Inc.	4.63%	5.40%	11.38%	15.17%	6.38%	3.84%
Cadence Design Systems Inc.	-0.62%	9.68%	9.08%	9.48%	10.21%	—
CrowdStrike Holdings Inc.	-6.88%	-0.95%	-6.22%	-12.96%	4.05%	—
Fair Isaac Corp.	20.18%	16.36%	17.20%	14.72%	3.17%	0.98%
International Business Machines Corp.	-11.26%	-4.33%	-17.77%	-9.88%	-8.42%	—
Intuit Inc.	-8.29%	-12.20%	-12.25%	1.68%	5.28%	12.21%
Oracle Corp.	-3.22%	-5.22%	-4.15%	11.53%	0.45%	—
Palantir Technologies Inc.	-16.74%	-8.58%	-66.55%	-77.66%	-177.53%	—
Palo Alto Networks Inc.	8.06%	13.55%	6.48%	-4.21%	-6.65%	-1.04%
Salesforce Inc.	-25.50%	-33.84%	-30.17%	-19.68%	-28.55%	—
ServiceNow Inc.	6.93%	6.20%	2.56%	3.80%	4.91%	—
Synopsys Inc.	-8.44%	-6.11%	3.17%	-6.00%	-6.17%	-11.36%
Workday Inc.	-10.06%	-18.80%	-13.69%	-20.04%	-24.24%	—

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).

¹ Economic profit. See details »

² 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenue
= 100 × 42,854 ÷ 251,493 = 17.04%

³ Click competitor name to see calculations.

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Microsoft Corp. (NASDAQ:MSFT)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin