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, 2025 | Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Net operating profit after taxes (NOPAT)1 | 102,672) | 90,364) | 71,055) | 71,024) | 65,443) | 46,746) | |
| Invested capital2 | 430,631) | 351,567) | 247,490) | 194,094) | 143,637) | 107,630) | |
| Performance Ratio | |||||||
| ROIC3 | 23.84% | 25.70% | 28.71% | 36.59% | 45.56% | 43.43% | |
| Benchmarks | |||||||
| ROIC, Competitors4 | |||||||
| Accenture PLC | — | 20.33% | 21.14% | 23.93% | 25.83% | 26.30% | |
| Adobe Inc. | — | 21.19% | 21.68% | 26.93% | 29.44% | 21.67% | |
| Cadence Design Systems Inc. | — | 14.27% | 24.69% | 23.98% | 24.26% | 25.05% | |
| CrowdStrike Holdings Inc. | 6.78% | 11.73% | 15.20% | 12.03% | 9.74% | 20.78% | |
| Datadog Inc. | — | 10.63% | 14.64% | 8.75% | 16.66% | 10.96% | |
| Fair Isaac Corp. | — | 41.58% | 34.72% | 33.53% | 29.73% | 19.32% | |
| International Business Machines Corp. | — | 4.37% | 7.63% | -0.68% | 3.78% | 3.44% | |
| Intuit Inc. | — | 10.69% | 8.53% | 9.30% | 17.64% | 20.65% | |
| Oracle Corp. | 12.27% | 11.71% | 10.34% | 9.70% | 17.55% | 11.53% | |
| Palantir Technologies Inc. | — | 13.53% | 16.73% | -7.21% | -14.60% | -54.59% | |
| Palo Alto Networks Inc. | — | 23.08% | 28.59% | 19.73% | 11.48% | 9.91% | |
| Salesforce Inc. | 8.38% | 5.72% | 3.01% | 5.42% | 8.25% | 5.13% | |
| ServiceNow Inc. | — | 23.07% | 22.31% | 17.69% | 18.88% | 20.49% | |
| Synopsys Inc. | — | 10.31% | 11.03% | 17.54% | 11.52% | 11.63% | |
| Workday Inc. | 9.13% | 7.80% | 1.25% | 6.56% | 1.38% | -2.21% | |
Based on: 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), 10-K (reporting date: 2020-06-30).
1 NOPAT. See details »
2 Invested capital. See details »
3 2025 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × 102,672 ÷ 430,631 = 23.84%
4 Click competitor name to see calculations.
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT demonstrates a consistent upward trend across the periods analyzed. Starting from $46,746 million in 2020, it increased significantly to $65,443 million in 2021, followed by continued growth reaching $71,024 million in 2022 and stabilizing around $71,055 million in 2023. Thereafter, a more pronounced rise is observed in 2024 and 2025, with values of $90,364 million and $102,672 million respectively. This reflects strong profitability improvements over time.
- Invested Capital
- Invested capital shows a continuous and substantial increase throughout the six-year span. Beginning at $107,630 million in 2020, the invested capital grows steadily year over year, reaching $143,637 million in 2021, then sharply increasing to $194,094 million in 2022. The upward trend persists with $247,490 million in 2023, surging further to $351,567 million in 2024, and culminating at $430,631 million by 2025. This indicates significant asset growth or capital deployment efforts.
- Return on Invested Capital (ROIC)
- Despite the rising NOPAT and invested capital, the ROIC metric exhibits a declining trajectory over the period. Starting at a high 43.43% in 2020, ROIC slightly improves to 45.56% in 2021 but then declines steadily each year thereafter: 36.59% in 2022, 28.71% in 2023, 25.7% in 2024, and finally 23.84% in 2025. This downward trend suggests that although profitability in absolute terms is increasing, the efficiency with which capital is being used to generate returns is diminishing.
- Overall Insight
- The data reflects a scenario where profitability, measured by NOPAT, is increasing, driven perhaps by operational growth or margin improvement. However, the invested capital is expanding even more rapidly, leading to a decreased return on invested capital. This could imply growing capital expenditures, acquisitions, or investments that have yet to yield proportional returns, signaling a potential shift in capital allocation strategy or the need for improved capital efficiency in future periods.
Decomposition of ROIC
Microsoft Corp., decomposition of ROIC
Based on: 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), 10-K (reporting date: 2020-06-30).
1 Operating profit margin (OPM). See calculations »
2 Turnover of capital (TO). See calculations »
3 Effective cash tax rate (CTR). See calculations »
The financial data reveals several notable trends in key performance indicators over the observed periods.
- Operating Profit Margin (OPM)
- The operating profit margin shows a generally positive trend, starting at 38.29% in mid-2020 and increasing steadily to peak around 45.67% by mid-2024, slightly dipping to 45.6% in mid-2025. This improvement indicates enhanced operational efficiency and profitability over the years.
- Turnover of Capital (TO)
- The turnover of capital exhibits a consistent declining trend, decreasing from 1.35 in mid-2020 to 0.67 by mid-2025. This suggests that the company is generating less revenue per unit of capital invested over time, which may indicate declining capital efficiency or increasing capital investment without proportional revenue growth.
- 1 – Effective Cash Tax Rate (CTR)
- The adjusted effective cash tax rate, calculated as 1 minus the effective cash tax rate, fluctuates within a range of approximately 75.68% to 86.95%. It begins at 84.2% in 2020, peaks at 86.95% in 2021, and gradually declines to around 77.95% by 2025. This variation might reflect changes in tax strategies, tax regulations, or profitability impacting taxable income.
- Return on Invested Capital (ROIC)
- Return on invested capital shows a declining trend, dropping from a high of 45.56% in 2021 to 23.84% in 2025. This downward trajectory indicates that the company is generating lower returns from its capital base over time, which could be a sign of increasing capital expenditure, decreasing operational efficiency, or diminishing returns on new investments.
In summary, while operating profit margin has improved, indicating better profitability, both capital turnover and return on invested capital have deteriorated, suggesting decreasing efficiency in capital utilization and investment returns. The adjusted effective cash tax rate has varied moderately but does not show a clear trend. Overall, these mixed signals highlight areas of operational strength alongside potential concerns in capital management efficiency.
Operating Profit Margin (OPM)
Microsoft Corp., OPM calculation, comparison to benchmarks
| Jun 30, 2025 | Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Net operating profit after taxes (NOPAT)1 | 102,672) | 90,364) | 71,055) | 71,024) | 65,443) | 46,746) | |
| Add: Cash operating taxes2 | 29,037) | 24,499) | 22,831) | 16,637) | 9,821) | 8,771) | |
| Net operating profit before taxes (NOPBT) | 131,709) | 114,864) | 93,886) | 87,661) | 75,264) | 55,517) | |
| Revenue | 281,724) | 245,122) | 211,915) | 198,270) | 168,088) | 143,015) | |
| Add: Increase (decrease) in unearned revenue | 7,081) | 6,371) | 5,405) | 4,267) | 4,961) | 1,974) | |
| Adjusted revenue | 288,805) | 251,493) | 217,320) | 202,537) | 173,049) | 144,989) | |
| Profitability Ratio | |||||||
| OPM3 | 45.60% | 45.67% | 43.20% | 43.28% | 43.49% | 38.29% | |
| Benchmarks | |||||||
| OPM, Competitors4 | |||||||
| Accenture PLC | — | 15.15% | 14.56% | 15.48% | 16.65% | 16.59% | |
| Adobe Inc. | — | 32.23% | 35.97% | 36.56% | 40.89% | 34.42% | |
| Cadence Design Systems Inc. | — | 31.87% | 31.47% | 32.28% | 28.51% | 27.83% | |
| CrowdStrike Holdings Inc. | 12.15% | 18.67% | 20.92% | 23.25% | 20.74% | 18.60% | |
| Datadog Inc. | — | 9.47% | 8.91% | 6.57% | 13.48% | 9.15% | |
| Fair Isaac Corp. | — | 44.29% | 43.68% | 39.53% | 38.57% | 24.46% | |
| International Business Machines Corp. | — | 11.46% | 17.57% | 2.98% | 10.91% | 9.64% | |
| Intuit Inc. | — | 24.30% | 23.08% | 21.00% | 28.02% | 29.42% | |
| Oracle Corp. | 31.76% | 30.01% | 26.91% | 24.11% | 40.03% | 34.29% | |
| Palantir Technologies Inc. | — | 11.18% | 9.03% | -8.42% | -23.57% | -109.97% | |
| Palo Alto Networks Inc. | — | 28.26% | 29.22% | 23.90% | 16.95% | 17.41% | |
| Salesforce Inc. | 24.54% | 17.72% | 10.29% | 16.42% | 20.31% | 15.73% | |
| ServiceNow Inc. | — | 20.13% | 18.76% | 14.87% | 17.20% | 17.77% | |
| Synopsys Inc. | — | 24.97% | 20.63% | 27.91% | 22.47% | 22.28% | |
| Workday Inc. | 10.08% | 8.65% | 3.29% | 8.82% | 2.23% | -2.53% | |
Based on: 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), 10-K (reporting date: 2020-06-30).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2025 Calculation
OPM = 100 × NOPBT ÷ Adjusted revenue
= 100 × 131,709 ÷ 288,805 = 45.60%
4 Click competitor name to see calculations.
- Net Operating Profit Before Taxes (NOPBT)
- Over the analyzed period, there is a clear and consistent upward trend in net operating profit before taxes. The NOPBT increased from 55,517 million US dollars in June 2020 to 131,709 million US dollars in June 2025. This represents more than a twofold increase, indicating strong growth in profitability before tax obligations over these years.
- Adjusted Revenue
- Adjusted revenue also exhibits a continuous positive trend throughout the period, growing from 144,989 million US dollars in June 2020 to 288,805 million US dollars in June 2025. The steady increase in revenue aligns closely with the rise in operating profit before taxes, reflecting expanding business operations or market presence.
- Operating Profit Margin (OPM)
- The operating profit margin shows a relatively stable yet slightly increasing pattern, starting at 38.29% in June 2020 and rising to approximately 45.6% by June 2025. Notably, the margin increased sharply between 2020 and 2021 and then maintained a high level, with minor fluctuations. The rise in OPM indicates improved operational efficiency or better cost management relative to revenue growth.
- Overall Analysis
- The data demonstrate a robust financial performance characterized by sustained growth in both revenue and profitability. The doubling of net operating profit before taxes alongside a near doubling of adjusted revenue suggests effective scaling of operations. The increase in operating profit margin reinforces that growth is not solely driven by revenue expansion but also by enhanced profitability and operational efficiency.
Turnover of Capital (TO)
Microsoft Corp., TO calculation, comparison to benchmarks
| Jun 30, 2025 | Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Revenue | 281,724) | 245,122) | 211,915) | 198,270) | 168,088) | 143,015) | |
| Add: Increase (decrease) in unearned revenue | 7,081) | 6,371) | 5,405) | 4,267) | 4,961) | 1,974) | |
| Adjusted revenue | 288,805) | 251,493) | 217,320) | 202,537) | 173,049) | 144,989) | |
| Invested capital1 | 430,631) | 351,567) | 247,490) | 194,094) | 143,637) | 107,630) | |
| Efficiency Ratio | |||||||
| TO2 | 0.67 | 0.72 | 0.88 | 1.04 | 1.20 | 1.35 | |
| Benchmarks | |||||||
| TO, Competitors3 | |||||||
| Accenture PLC | — | 1.76 | 1.94 | 2.08 | 1.95 | 1.97 | |
| Adobe Inc. | — | 0.88 | 0.80 | 0.86 | 0.80 | 0.70 | |
| Cadence Design Systems Inc. | — | 0.65 | 1.00 | 1.00 | 0.98 | 0.99 | |
| CrowdStrike Holdings Inc. | 0.61 | 0.64 | 0.75 | 0.64 | 0.48 | 1.14 | |
| Datadog Inc. | — | 1.10 | 1.60 | 1.45 | 1.26 | 1.30 | |
| Fair Isaac Corp. | — | 1.22 | 1.12 | 1.05 | 0.95 | 0.90 | |
| International Business Machines Corp. | — | 0.57 | 0.56 | 0.58 | 0.52 | 0.58 | |
| Intuit Inc. | — | 0.65 | 0.61 | 0.52 | 0.79 | 0.89 | |
| Oracle Corp. | 0.50 | 0.53 | 0.52 | 0.54 | 0.51 | 0.44 | |
| Palantir Technologies Inc. | — | 1.15 | 1.86 | 0.60 | 0.61 | 0.49 | |
| Palo Alto Networks Inc. | — | 0.94 | 1.01 | 0.86 | 0.74 | 0.62 | |
| Salesforce Inc. | 0.46 | 0.43 | 0.39 | 0.36 | 0.44 | 0.41 | |
| ServiceNow Inc. | — | 1.22 | 1.24 | 1.24 | 1.16 | 1.23 | |
| Synopsys Inc. | — | 0.60 | 0.71 | 0.71 | 0.63 | 0.58 | |
| Workday Inc. | 0.94 | 0.90 | 0.82 | 0.74 | 0.77 | 0.78 | |
Based on: 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), 10-K (reporting date: 2020-06-30).
1 Invested capital. See details »
2 2025 Calculation
TO = Adjusted revenue ÷ Invested capital
= 288,805 ÷ 430,631 = 0.67
3 Click competitor name to see calculations.
- Revenue Trend
- The adjusted revenue demonstrated a consistent upward trend over the evaluated periods. Starting at 144,989 million US dollars in 2020, it increased steadily each year, reaching 288,805 million US dollars by 2025. This indicates a robust and continuous growth trajectory in the company’s revenue generation capabilities.
- Invested Capital Trend
- Invested capital has also shown a substantial increase throughout the years. Beginning at 107,630 million US dollars in 2020, the invested capital rose significantly to 430,631 million US dollars by 2025. This growth reflects a considerable expansion in the resources committed to the company’s operations and long-term assets.
- Turnover of Capital (TO)
- The turnover of capital ratio exhibits a declining trend, moving from 1.35 in 2020 down to 0.67 in 2025. This indicates that despite increasing revenue, the efficiency of capital utilization is decreasing. The capital turnover dropping below 1.0 in 2022 and continuing downward suggests that revenue growth is not keeping pace proportionally with the growth in invested capital.
- Overall Analysis
- The data reveals a company undergoing significant capital investment accompanied by strong revenue growth. However, the declining turnover of capital ratio points to a decreasing efficiency in using the invested capital to generate revenue. This may call for a closer examination of the capital allocation strategy or operational efficiency to enhance capital utilization.
Effective Cash Tax Rate (CTR)
Microsoft Corp., CTR calculation, comparison to benchmarks
| Jun 30, 2025 | Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Net operating profit after taxes (NOPAT)1 | 102,672) | 90,364) | 71,055) | 71,024) | 65,443) | 46,746) | |
| Add: Cash operating taxes2 | 29,037) | 24,499) | 22,831) | 16,637) | 9,821) | 8,771) | |
| Net operating profit before taxes (NOPBT) | 131,709) | 114,864) | 93,886) | 87,661) | 75,264) | 55,517) | |
| Tax Rate | |||||||
| CTR3 | 22.05% | 21.33% | 24.32% | 18.98% | 13.05% | 15.80% | |
| Benchmarks | |||||||
| CTR, Competitors4 | |||||||
| Accenture PLC | — | 23.87% | 25.34% | 25.55% | 20.47% | 19.34% | |
| Adobe Inc. | — | 25.54% | 24.54% | 14.22% | 10.28% | 9.63% | |
| Cadence Design Systems Inc. | — | 31.39% | 21.85% | 25.88% | 13.59% | 9.34% | |
| CrowdStrike Holdings Inc. | 8.16% | 1.48% | 2.46% | 18.96% | 2.38% | 1.95% | |
| Datadog Inc. | — | -1.95% | -2.78% | 7.98% | 1.83% | 8.06% | |
| Fair Isaac Corp. | — | 23.32% | 28.74% | 19.06% | 19.07% | 12.22% | |
| International Business Machines Corp. | — | 32.49% | 22.56% | 139.75% | 33.85% | 37.95% | |
| Intuit Inc. | — | 32.36% | 39.49% | 14.74% | 20.15% | 20.99% | |
| Oracle Corp. | 22.60% | 25.73% | 25.66% | 26.20% | 13.28% | 23.42% | |
| Palantir Technologies Inc. | — | -4.95% | 0.60% | — | — | — | |
| Palo Alto Networks Inc. | — | 13.32% | 2.83% | 3.82% | 8.83% | 7.62% | |
| Salesforce Inc. | 26.02% | 25.29% | 25.49% | 8.32% | 6.83% | 19.81% | |
| ServiceNow Inc. | — | 5.72% | 4.32% | 4.41% | 5.03% | 5.90% | |
| Synopsys Inc. | — | 30.80% | 24.60% | 11.45% | 18.39% | 10.36% | |
| Workday Inc. | 3.78% | -0.43% | 53.58% | -0.77% | 19.25% | — | |
Based on: 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), 10-K (reporting date: 2020-06-30).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2025 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × 29,037 ÷ 131,709 = 22.05%
4 Click competitor name to see calculations.
- Cash Operating Taxes
- The cash operating taxes have displayed consistent growth over the analyzed periods, increasing from $8,771 million in 2020 to $29,037 million in 2025. This upward trend indicates a substantial rise in tax payments, which may be attributed to increasing profitability or changes in tax regulations impacting the company.
- Net Operating Profit Before Taxes (NOPBT)
- The NOPBT shows a steady and significant increase from $55,517 million in 2020 to $131,709 million in 2025. This growth reflects the company's ability to generate higher operating profits before tax expenses, suggesting effective operational performance and revenue expansion over the years.
- Effective Cash Tax Rate (CTR)
- The effective cash tax rate has exhibited variability throughout the periods. It started at 15.8% in 2020, dropped to its lowest point at 13.05% in 2021, then increased sharply to 24.32% in 2023. The rate slightly decreased afterwards, settling around 22.05% by 2025. This fluctuation could be influenced by tax planning strategies, changes in tax legislation, or operational shifts affecting taxable income.
- Overall Trends and Insights
- The data demonstrates robust growth in both operating profitability and associated cash tax payments. Although the company’s profit before tax has nearly more than doubled over six years, the effective cash tax rate has not increased proportionally, reflecting a degree of tax rate management or evolving tax environments. The rising cash operating taxes alongside increasing profits point to growing contributions to tax authorities, which may affect net profitability. Monitoring these trends can provide valuable insights into the company's fiscal discipline and tax strategy effectiveness.