Return on Capital (ROC)
Return on capital (ROC) is after tax rate of return on net business assets. ROIC is unaffected by changes in interest rates or company debt and equity structure. It measures business productivity performance.
Return on Invested Capital (ROIC)
Microsoft Corp., ROIC calculation, comparison to benchmarks
| Jun 30, 2026 | Jun 30, 2025 | Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Net operating profit after taxes (NOPAT)1 | 153,695) | 102,672) | 90,364) | 71,055) | 71,024) | 65,443) | |
| Invested capital2 | 571,487) | 430,631) | 351,567) | 247,490) | 194,094) | 143,637) | |
| Performance Ratio | |||||||
| ROIC3 | 26.89% | 23.84% | 25.70% | 28.71% | 36.59% | 45.56% | |
| Benchmarks | |||||||
| ROIC, Competitors4 | |||||||
| Accenture PLC | — | 20.11% | 20.33% | 21.14% | 23.93% | 25.83% | |
| Adobe Inc. | — | 33.16% | 21.19% | 21.68% | 26.93% | 29.44% | |
| AppLovin Corp. | — | 63.82% | 35.87% | 11.27% | -3.27% | 0.83% | |
| Cadence Design Systems Inc. | — | 15.91% | 14.27% | 24.69% | 23.98% | 24.26% | |
| CrowdStrike Holdings Inc. | 7.36% | 6.78% | 11.73% | 15.20% | 12.03% | 9.74% | |
| Datadog Inc. | — | 11.73% | 10.63% | 14.64% | 8.75% | 16.66% | |
| International Business Machines Corp. | — | 10.92% | 4.46% | 7.72% | -0.61% | 3.86% | |
| Intuit Inc. | — | 14.40% | 10.69% | 8.53% | 9.30% | 17.64% | |
| Oracle Corp. | 14.64% | 12.27% | 11.71% | 10.34% | 9.70% | 17.55% | |
| Palantir Technologies Inc. | — | 67.44% | 13.53% | 16.73% | -7.21% | -14.60% | |
| Palo Alto Networks Inc. | — | 14.40% | 23.08% | 28.59% | 19.73% | 11.48% | |
| Salesforce Inc. | 12.76% | 8.20% | 6.31% | 2.31% | 5.42% | 8.25% | |
| ServiceNow Inc. | — | 19.66% | 23.07% | 22.31% | 17.69% | 18.88% | |
| Synopsys Inc. | — | 4.23% | 10.31% | 11.03% | 17.54% | 11.52% | |
| Workday Inc. | 10.47% | 9.13% | 7.80% | 1.25% | 6.56% | 1.38% | |
Based on: 10-K (reporting date: 2026-06-30), 10-K (reporting date: 2025-06-30), 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).
1 NOPAT. See details »
2 Invested capital. See details »
3 2026 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × 153,695 ÷ 571,487 = 26.89%
4 Click competitor name to see calculations.
The financial trajectory from June 2021 to June 2026 is characterized by substantial growth in both operating profitability and capital deployment, although these two metrics expanded at different rates, creating a distinct pattern in efficiency returns.
- Net Operating Profit After Taxes (NOPAT)
- A consistent upward trend is observed in NOPAT, which increased from US$ 65,443 million in 2021 to US$ 153,695 million by 2026. While growth was moderate between 2022 and 2023, a significant acceleration occurred from 2024 onward, with the most pronounced surge appearing in the 2026 period.
- Invested Capital
- Invested capital has expanded aggressively and continuously throughout the analyzed timeframe, rising from US$ 143,637 million in 2021 to US$ 571,487 million in 2026. This represents a nearly fourfold increase in the capital base, indicating a period of intensive scaling and heavy investment.
- Return on Invested Capital (ROIC)
- A downward trend in ROIC is evident from 2021 through 2025, with the ratio declining from 45.56% to 23.84%. This compression suggests that during this interval, the growth in invested capital outpaced the growth in net operating profits. However, this trend reversed in 2026, as ROIC improved to 26.89%, indicating that the recent increase in NOPAT has begun to outstrip the expansion of the capital base.
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Decomposition of ROIC
Microsoft Corp., decomposition of ROIC
Based on: 10-K (reporting date: 2026-06-30), 10-K (reporting date: 2025-06-30), 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).
1 Operating profit margin (OPM). See calculations »
2 Turnover of capital (TO). See calculations »
3 Effective cash tax rate (CTR). See calculations »
Return on Invested Capital (ROIC) experienced a sustained downward trajectory from 2021, falling from 45.56% to a low of 23.84% by 2025, before recording a partial recovery to 26.89% in 2026. This movement is the result of divergent trends among the three primary drivers of return: operating profitability, asset efficiency, and tax effects.
- Operating Profit Margin (OPM)
- Profitability remained resilient and showed an overall upward trend. After maintaining a stable range around 43% between 2021 and 2023, the margin expanded to 45.67% in 2024 and reached a peak of 50.15% in 2026. This indicates increasing operational efficiency and stronger pricing power over the analyzed period.
- Turnover of Capital (TO)
- A consistent and pronounced decline is observed in capital efficiency. The turnover ratio dropped steadily from 1.20 in 2021 to 0.60 in 2026. This trend indicates that the growth in the invested capital base significantly outpaced revenue growth, acting as the primary negative driver of ROIC throughout the period.
- Effective Cash Tax Rate Impact (1 – CTR)
- The tax component exhibited volatility. The value declined from 86.95% in 2021 to a low of 75.68% in 2023, before stabilizing and eventually rising sharply to 90.06% in 2026. The improved tax position in 2026 provided a positive contribution to the recovery of the overall return.
The decomposition reveals that while operating margins expanded significantly, these gains were insufficient to offset the sharp deterioration in capital turnover for most of the period. The recovery in ROIC observed in 2026 was driven by a combination of a substantial increase in operating profit margin and a more favorable effective cash tax rate, which collectively countered the continued decline in capital turnover.
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Operating Profit Margin (OPM)
Microsoft Corp., OPM calculation, comparison to benchmarks
| Jun 30, 2026 | Jun 30, 2025 | Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Net operating profit after taxes (NOPAT)1 | 153,695) | 102,672) | 90,364) | 71,055) | 71,024) | 65,443) | |
| Add: Cash operating taxes2 | 16,958) | 29,037) | 24,499) | 22,831) | 16,637) | 9,821) | |
| Net operating profit before taxes (NOPBT) | 170,653) | 131,709) | 114,864) | 93,886) | 87,661) | 75,264) | |
| Revenue | 331,839) | 281,724) | 245,122) | 211,915) | 198,270) | 168,088) | |
| Add: Increase (decrease) in unearned revenue | 8,447) | 7,081) | 6,371) | 5,405) | 4,267) | 4,961) | |
| Adjusted revenue | 340,286) | 288,805) | 251,493) | 217,320) | 202,537) | 173,049) | |
| Profitability Ratio | |||||||
| OPM3 | 50.15% | 45.60% | 45.67% | 43.20% | 43.28% | 43.49% | |
| Benchmarks | |||||||
| OPM, Competitors4 | |||||||
| Accenture PLC | — | 15.87% | 15.15% | 14.56% | 15.48% | 16.65% | |
| Adobe Inc. | — | 38.61% | 32.23% | 35.97% | 36.56% | 40.89% | |
| AppLovin Corp. | — | 75.98% | 40.17% | 20.43% | -1.60% | 5.23% | |
| Cadence Design Systems Inc. | — | 30.42% | 31.87% | 31.47% | 32.28% | 28.51% | |
| CrowdStrike Holdings Inc. | 12.59% | 12.15% | 18.67% | 20.92% | 23.25% | 20.74% | |
| Datadog Inc. | — | 6.59% | 9.47% | 8.91% | 6.57% | 13.48% | |
| International Business Machines Corp. | — | 20.84% | 11.61% | 17.71% | 3.11% | 11.04% | |
| Intuit Inc. | — | 26.71% | 24.30% | 23.08% | 21.00% | 28.02% | |
| Oracle Corp. | 42.22% | 31.76% | 30.01% | 26.91% | 24.11% | 40.03% | |
| Palantir Technologies Inc. | — | 34.55% | 11.18% | 9.03% | -8.42% | -23.57% | |
| Palo Alto Networks Inc. | — | 24.12% | 28.26% | 29.22% | 23.90% | 16.95% | |
| Salesforce Inc. | 29.96% | 24.08% | 19.05% | 8.46% | 16.42% | 20.31% | |
| ServiceNow Inc. | — | 22.90% | 20.13% | 18.76% | 14.87% | 17.20% | |
| Synopsys Inc. | — | 31.74% | 24.97% | 20.63% | 27.91% | 22.47% | |
| Workday Inc. | 13.26% | 10.08% | 8.65% | 3.29% | 8.82% | 2.23% | |
Based on: 10-K (reporting date: 2026-06-30), 10-K (reporting date: 2025-06-30), 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).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2026 Calculation
OPM = 100 × NOPBT ÷ Adjusted revenue
= 100 × 170,653 ÷ 340,286 = 50.15%
4 Click competitor name to see calculations.
The operating performance exhibits a consistent upward trajectory in both absolute profit and revenue generation over the six-year period. While revenue grew steadily, the growth in net operating profit before taxes (NOPBT) accelerated, leading to a notable expansion in the operating profit margin (OPM) in the latter half of the analyzed timeframe.
- Revenue and Profitability Growth
- Adjusted revenue increased from 173,049 million US$ in 2021 to 340,286 million US$ by 2026. This growth was accompanied by a substantial rise in NOPBT, which climbed from 75,264 million US$ to 170,653 million US$, indicating a successful scaling of operations.
- Operating Profit Margin Trends
- The OPM remained relatively stagnant during the first three years, moving slightly from 43.49% in 2021 to 43.20% in 2023. A positive inflection point is observed in 2024, where the margin rose to 45.67%. This upward momentum culminates in 2026, with the margin reaching 50.15%, representing a significant increase in operational efficiency.
- Operational Leverage and Efficiency
- The data suggests a strong degree of operational leverage, as NOPBT growth began to outpace revenue growth in the later years. The expansion of the OPM to over 50% by 2026 indicates that incremental revenue is being generated with high efficiency, resulting in a higher percentage of each dollar of revenue being converted into operating profit.
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Turnover of Capital (TO)
Microsoft Corp., TO calculation, comparison to benchmarks
| Jun 30, 2026 | Jun 30, 2025 | Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Revenue | 331,839) | 281,724) | 245,122) | 211,915) | 198,270) | 168,088) | |
| Add: Increase (decrease) in unearned revenue | 8,447) | 7,081) | 6,371) | 5,405) | 4,267) | 4,961) | |
| Adjusted revenue | 340,286) | 288,805) | 251,493) | 217,320) | 202,537) | 173,049) | |
| Invested capital1 | 571,487) | 430,631) | 351,567) | 247,490) | 194,094) | 143,637) | |
| Efficiency Ratio | |||||||
| TO2 | 0.60 | 0.67 | 0.72 | 0.88 | 1.04 | 1.20 | |
| Benchmarks | |||||||
| TO, Competitors3 | |||||||
| Accenture PLC | — | 1.56 | 1.76 | 1.94 | 2.08 | 1.95 | |
| Adobe Inc. | — | 1.11 | 0.88 | 0.80 | 0.86 | 0.80 | |
| AppLovin Corp. | — | 0.97 | 1.04 | 0.73 | 0.53 | 0.50 | |
| Cadence Design Systems Inc. | — | 0.67 | 0.65 | 1.00 | 1.00 | 0.98 | |
| CrowdStrike Holdings Inc. | 0.60 | 0.61 | 0.64 | 0.75 | 0.64 | 0.48 | |
| Datadog Inc. | — | 1.69 | 1.10 | 1.60 | 1.45 | 1.26 | |
| International Business Machines Corp. | — | 0.56 | 0.57 | 0.56 | 0.58 | 0.53 | |
| Intuit Inc. | — | 0.77 | 0.65 | 0.61 | 0.52 | 0.79 | |
| Oracle Corp. | 0.41 | 0.50 | 0.53 | 0.52 | 0.54 | 0.51 | |
| Palantir Technologies Inc. | — | 1.93 | 1.15 | 1.86 | 0.60 | 0.61 | |
| Palo Alto Networks Inc. | — | 0.84 | 0.94 | 1.01 | 0.86 | 0.74 | |
| Salesforce Inc. | 0.47 | 0.46 | 0.43 | 0.40 | 0.36 | 0.44 | |
| ServiceNow Inc. | — | 0.91 | 1.22 | 1.24 | 1.24 | 1.16 | |
| Synopsys Inc. | — | 0.17 | 0.60 | 0.71 | 0.71 | 0.63 | |
| Workday Inc. | 0.83 | 0.94 | 0.90 | 0.82 | 0.74 | 0.77 | |
Based on: 10-K (reporting date: 2026-06-30), 10-K (reporting date: 2025-06-30), 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).
1 Invested capital. See details »
2 2026 Calculation
TO = Adjusted revenue ÷ Invested capital
= 340,286 ÷ 571,487 = 0.60
3 Click competitor name to see calculations.
The financial trajectory indicates a significant divergence between revenue growth and capital accumulation, resulting in a persistent decline in the efficiency of capital utilization over the analyzed period.
- Adjusted Revenue Trends
- Adjusted revenue demonstrates a consistent upward trajectory, increasing from US$ 173,049 million in 2021 to a projected US$ 340,286 million by 2026. This steady growth reflects a sustained expansion in top-line performance.
- Invested Capital Growth
- Invested capital has experienced rapid escalation, rising from US$ 143,637 million in 2021 to US$ 571,487 million by 2026. The scale of investment has expanded more aggressively than the revenue it supports, with the capital base nearly quadrupling over the six-year interval.
- Turnover of Capital Analysis
- The turnover of capital ratio has decreased monotonically from 1.20 in 2021 to 0.60 in 2026. This downward trend signifies that the company is generating progressively less revenue per unit of invested capital. The halving of the turnover ratio indicates a deterioration in capital productivity, suggesting that the recent and projected surges in invested capital have not yet yielded proportional increases in adjusted revenue.
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Effective Cash Tax Rate (CTR)
Microsoft Corp., CTR calculation, comparison to benchmarks
| Jun 30, 2026 | Jun 30, 2025 | Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Net operating profit after taxes (NOPAT)1 | 153,695) | 102,672) | 90,364) | 71,055) | 71,024) | 65,443) | |
| Add: Cash operating taxes2 | 16,958) | 29,037) | 24,499) | 22,831) | 16,637) | 9,821) | |
| Net operating profit before taxes (NOPBT) | 170,653) | 131,709) | 114,864) | 93,886) | 87,661) | 75,264) | |
| Tax Rate | |||||||
| CTR3 | 9.94% | 22.05% | 21.33% | 24.32% | 18.98% | 13.05% | |
| Benchmarks | |||||||
| CTR, Competitors4 | |||||||
| Accenture PLC | — | 18.62% | 23.87% | 25.34% | 25.55% | 20.47% | |
| Adobe Inc. | — | 22.29% | 25.54% | 24.54% | 14.22% | 10.28% | |
| AppLovin Corp. | — | 13.66% | 13.75% | 24.45% | — | 68.18% | |
| Cadence Design Systems Inc. | — | 21.53% | 31.39% | 21.85% | 25.88% | 13.59% | |
| CrowdStrike Holdings Inc. | 2.01% | 8.16% | 1.48% | 2.46% | 18.96% | 2.38% | |
| Datadog Inc. | — | -5.69% | -1.95% | -2.78% | 7.98% | 1.83% | |
| International Business Machines Corp. | — | 6.96% | 32.07% | 22.38% | 133.97% | 33.45% | |
| Intuit Inc. | — | 30.34% | 32.36% | 39.49% | 14.74% | 20.15% | |
| Oracle Corp. | 14.96% | 22.60% | 25.73% | 25.66% | 26.20% | 13.28% | |
| Palantir Technologies Inc. | — | -1.13% | -4.95% | 0.60% | — | — | |
| Palo Alto Networks Inc. | — | 29.25% | 13.32% | 2.83% | 3.82% | 8.83% | |
| Salesforce Inc. | 8.82% | 26.52% | 23.51% | 31.02% | 8.32% | 6.83% | |
| ServiceNow Inc. | — | 5.30% | 5.72% | 4.32% | 4.41% | 5.03% | |
| Synopsys Inc. | — | 22.23% | 30.80% | 24.60% | 11.45% | 18.39% | |
| Workday Inc. | 5.00% | 3.78% | -0.43% | 53.58% | -0.77% | 19.25% | |
Based on: 10-K (reporting date: 2026-06-30), 10-K (reporting date: 2025-06-30), 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).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2026 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × 16,958 ÷ 170,653 = 9.94%
4 Click competitor name to see calculations.
An analysis of the financial performance from June 30, 2021, to June 30, 2026, reveals a consistent trajectory of growth in operating profitability contrasted by significant volatility in the effective cash tax rate.
- Net Operating Profit Before Taxes (NOPBT)
- A sustained upward trend in profitability is observed throughout the period. NOPBT increased steadily from 75,264 million US dollars in 2021 to 170,653 million US dollars by 2026, indicating a strong and continuous expansion of operational earnings.
- Cash Operating Taxes
- Cash tax outflows grew consistently between 2021 and 2025, rising from 9,821 million US dollars to a peak of 29,037 million US dollars. However, a notable contraction occurred in 2026, where payments decreased to 16,958 million US dollars, despite the concurrent increase in operating profit.
- Effective Cash Tax Rate (CTR)
- The effective cash tax rate experienced a period of expansion from 2021 to 2023, rising from 13.05% to a peak of 24.32%. After maintaining a range between 21.33% and 22.05% during 2024 and 2025, the CTR dropped sharply to 9.94% in 2026. This suggests a significant decoupling of tax outflows from operating profit in the final year, resulting in the lowest effective cash tax rate of the entire period.
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