Analysis of Profitability Ratios
Profitability ratios measure the company ability to generate profitable sales from its resources (assets).
Profitability Ratios (Summary)
Microsoft Corp., profitability ratios
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).
The analyzed period reveals a corporate financial profile characterized by stable gross profitability and expanding operational efficiency, contrasted by a declining trend in equity returns. While the company maintains a high threshold for profit margins, the divergence between operational gains and return metrics suggests shifts in capital structure or asset utilization.
- Profit Margin Analysis
- Gross profit margins have remained remarkably stable, fluctuating minimally between a high of 69.76% in 2024 and a low of 67.94% in 2026. In contrast, the operating profit margin exhibits a consistent upward trajectory, increasing from 41.59% in 2021 to 46.78% in 2026. This divergence indicates that the company has successfully optimized its operating expenses and achieved greater operational leverage over time.
- Net Profitability Trends
- Net profit margins show a period of volatility followed by significant growth. After decreasing to a low of 34.15% in 2023, the net margin recovered and expanded to 40.31% by 2026. This suggests that bottom-line performance is benefiting from the improvements in operating margins, effectively converting a higher percentage of revenue into net income.
- Return on Investment Metrics
- A distinct downward trend is observed in the Return on Equity (ROE), which declined from 43.68% in 2022 to 30.23% in 2026. This represents a significant contraction in the efficiency of generating profits from shareholders' equity. Return on Assets (ROA) has remained more stable but reflects a slight overall decrease, moving from 18.36% in 2021 to 17.64% in 2026, indicating a marginal decline in the efficiency of total asset utilization.
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Return on Sales
Return on Investment
Gross Profit Margin
Microsoft Corp., gross profit margin 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) | |||||||
| Gross margin | 225,465) | 193,893) | 171,008) | 146,052) | 135,620) | 115,856) | |
| Revenue | 331,839) | 281,724) | 245,122) | 211,915) | 198,270) | 168,088) | |
| Profitability Ratio | |||||||
| Gross profit margin1 | 67.94% | 68.82% | 69.76% | 68.92% | 68.40% | 68.93% | |
| Benchmarks | |||||||
| Gross Profit Margin, Competitors2 | |||||||
| Accenture PLC | — | 31.91% | 32.61% | 32.34% | 31.99% | 32.38% | |
| Adobe Inc. | — | 89.27% | 89.04% | 87.87% | 87.70% | 88.18% | |
| AppLovin Corp. | — | 87.86% | 75.22% | 67.74% | 55.41% | 64.62% | |
| Cadence Design Systems Inc. | — | 86.36% | 86.05% | 89.36% | 89.57% | 89.73% | |
| CrowdStrike Holdings Inc. | 74.67% | 74.92% | 75.27% | 73.17% | 73.60% | 73.75% | |
| Datadog Inc. | — | 79.96% | 80.79% | 80.74% | 79.30% | 77.23% | |
| International Business Machines Corp. | — | 58.19% | 56.65% | 55.45% | 54.00% | 54.90% | |
| Intuit Inc. | — | 79.57% | 78.72% | 78.13% | 81.09% | 82.53% | |
| Oracle Corp. | 65.82% | 70.51% | 71.41% | 72.85% | 79.08% | 80.59% | |
| Palantir Technologies Inc. | — | 82.37% | 80.25% | 80.62% | 78.56% | 77.99% | |
| Palo Alto Networks Inc. | — | 73.41% | 74.35% | 72.29% | 68.76% | 70.05% | |
| Salesforce Inc. | 77.68% | 77.19% | 75.50% | 73.34% | 73.48% | 74.41% | |
| ServiceNow Inc. | — | 77.53% | 79.18% | 78.59% | 78.29% | 77.05% | |
| Synopsys Inc. | — | 76.98% | 79.68% | 79.08% | 79.07% | 79.50% | |
| Workday Inc. | 75.70% | 75.50% | 75.60% | 72.41% | 72.21% | 72.25% | |
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 2026 Calculation
Gross profit margin = 100 × Gross margin ÷ Revenue
= 100 × 225,465 ÷ 331,839 = 67.94%
2 Click competitor name to see calculations.
An analysis of the financial performance between June 30, 2021, and June 30, 2026, reveals a consistent expansion in both top-line revenue and absolute gross margin. Revenue increased from US$ 168,088 million to US$ 331,839 million, while the absolute gross margin grew from US$ 115,856 million to US$ 225,465 million over the six-year period.
- Gross Profit Margin Stability
- The gross profit margin percentage remained relatively stable, fluctuating within a narrow range between 67.94% and 69.76%. This indicates a consistent ability to manage production and service costs relative to sales growth for the majority of the observed period.
- Margin Peak and Trend Reversal
- Profitability peaked on June 30, 2024, with the gross profit margin reaching 69.76%. Subsequent to this peak, a gradual downward trend is observed, with the margin declining to 68.82% in 2025 and further to 67.94% by June 30, 2026.
- Revenue Growth vs. Margin Compression
- Despite the continued increase in absolute gross profit and revenue through 2026, the slight contraction in the margin percentage during the final two years suggests that the cost of revenue grew at a marginally faster pace than total revenue during that specific timeframe.
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Operating Profit Margin
Microsoft Corp., operating profit margin 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) | |||||||
| Operating income | 155,237) | 128,528) | 109,433) | 88,523) | 83,383) | 69,916) | |
| Revenue | 331,839) | 281,724) | 245,122) | 211,915) | 198,270) | 168,088) | |
| Profitability Ratio | |||||||
| Operating profit margin1 | 46.78% | 45.62% | 44.64% | 41.77% | 42.06% | 41.59% | |
| Benchmarks | |||||||
| Operating Profit Margin, Competitors2 | |||||||
| Accenture PLC | — | 14.68% | 14.79% | 13.74% | 15.21% | 15.08% | |
| Adobe Inc. | — | 36.63% | 31.35% | 34.26% | 34.64% | 36.76% | |
| AppLovin Corp. | — | 75.75% | 39.78% | 19.74% | -1.70% | 5.37% | |
| Cadence Design Systems Inc. | — | 28.17% | 29.10% | 30.59% | 30.15% | 26.07% | |
| CrowdStrike Holdings Inc. | -6.10% | -3.05% | -0.07% | -8.48% | -9.82% | -10.58% | |
| Datadog Inc. | — | -1.29% | 2.02% | -1.57% | -3.50% | -1.86% | |
| International Business Machines Corp. | — | 17.50% | 14.95% | 15.17% | 13.50% | 11.97% | |
| Intuit Inc. | — | 26.14% | 22.29% | 21.86% | 20.20% | 25.95% | |
| Oracle Corp. | 30.59% | 30.80% | 28.99% | 26.21% | 25.74% | 37.58% | |
| Palantir Technologies Inc. | — | 31.59% | 10.83% | 5.39% | -8.46% | -26.66% | |
| Palo Alto Networks Inc. | — | 13.48% | 8.52% | 5.62% | -3.43% | -7.15% | |
| Salesforce Inc. | 20.06% | 19.01% | 14.38% | 3.29% | 2.07% | 2.14% | |
| ServiceNow Inc. | — | 13.74% | 12.42% | 8.49% | 4.90% | 4.36% | |
| Synopsys Inc. | — | 12.97% | 22.13% | 21.72% | 22.87% | 17.48% | |
| Workday Inc. | 7.55% | 4.91% | 2.52% | -3.57% | -2.27% | -5.76% | |
| Operating Profit Margin, Sector | |||||||
| Software & Services | — | 32.45% | 30.31% | 27.20% | 27.08% | 27.93% | |
| Operating Profit Margin, Industry | |||||||
| Information Technology | — | 30.83% | 26.54% | 24.37% | 26.31% | 26.64% | |
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 2026 Calculation
Operating profit margin = 100 × Operating income ÷ Revenue
= 100 × 155,237 ÷ 331,839 = 46.78%
2 Click competitor name to see calculations.
The financial performance from June 30, 2021, through June 30, 2026, is characterized by consistent growth in both top-line revenue and operating income, accompanied by a general expansion of operational efficiency.
- Revenue and Operating Income Growth
- Revenue demonstrated a steady upward trajectory, increasing from US$ 168,088 million in 2021 to US$ 331,839 million by 2026. Parallel to this, operating income grew from US$ 69,916 million to US$ 155,237 million over the same period, indicating a strong ability to scale operations.
- Operating Profit Margin Analysis
- The operating profit margin exhibited a long-term positive trend, starting at 41.59% in 2021 and reaching 46.78% by 2026. While a marginal decline was observed in 2023, where the margin dropped to 41.77% from 42.06% in 2022, this was followed by a significant period of expansion. The margin increased substantially to 44.64% in 2024 and continued to climb steadily through 2025 and 2026.
- Operational Efficiency Trends
- The acceleration of the operating profit margin in the latter half of the analyzed period suggests that operating income grew at a faster rate than revenue. This pattern indicates improved cost management or a strategic shift toward higher-margin product and service offerings.
Overall, the data reflects a period of robust financial health, where scaling revenue was successfully leveraged to enhance the operating profit margin, resulting in significantly higher absolute operating income.
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Net Profit Margin
Microsoft Corp., net profit margin 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 income | 133,749) | 101,832) | 88,136) | 72,361) | 72,738) | 61,271) | |
| Revenue | 331,839) | 281,724) | 245,122) | 211,915) | 198,270) | 168,088) | |
| Profitability Ratio | |||||||
| Net profit margin1 | 40.31% | 36.15% | 35.96% | 34.15% | 36.69% | 36.45% | |
| Benchmarks | |||||||
| Net Profit Margin, Competitors2 | |||||||
| Accenture PLC | — | 11.02% | 11.19% | 10.72% | 11.17% | 11.69% | |
| Adobe Inc. | — | 30.00% | 25.85% | 27.97% | 27.01% | 30.55% | |
| AppLovin Corp. | — | 60.83% | 33.55% | 10.87% | -6.84% | 1.27% | |
| Cadence Design Systems Inc. | — | 20.94% | 22.74% | 25.46% | 23.84% | 23.29% | |
| CrowdStrike Holdings Inc. | -3.38% | -0.49% | 2.92% | -8.18% | -16.18% | -10.59% | |
| Datadog Inc. | — | 3.14% | 6.85% | 2.28% | -2.99% | -2.02% | |
| International Business Machines Corp. | — | 15.69% | 9.60% | 12.13% | 2.71% | 10.01% | |
| Intuit Inc. | — | 20.55% | 18.19% | 16.59% | 16.23% | 21.41% | |
| Oracle Corp. | 25.37% | 21.68% | 19.76% | 17.02% | 15.83% | 33.96% | |
| Palantir Technologies Inc. | — | 36.31% | 16.13% | 9.43% | -19.61% | -33.75% | |
| Palo Alto Networks Inc. | — | 12.30% | 32.11% | 6.38% | -4.85% | -11.72% | |
| Salesforce Inc. | 17.96% | 16.35% | 11.87% | 0.66% | 5.45% | 19.16% | |
| ServiceNow Inc. | — | 13.16% | 12.97% | 19.30% | 4.49% | 3.90% | |
| Synopsys Inc. | — | 18.89% | 36.94% | 21.05% | 19.38% | 18.02% | |
| Workday Inc. | 7.26% | 6.23% | 19.02% | -5.90% | 0.57% | -6.54% | |
| Net Profit Margin, Sector | |||||||
| Software & Services | — | 26.02% | 24.71% | 21.78% | 21.43% | 25.04% | |
| Net Profit Margin, Industry | |||||||
| Information Technology | — | 25.74% | 20.58% | 20.29% | 22.34% | 23.54% | |
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 2026 Calculation
Net profit margin = 100 × Net income ÷ Revenue
= 100 × 133,749 ÷ 331,839 = 40.31%
2 Click competitor name to see calculations.
The financial performance from 2021 to 2026 demonstrates a consistent upward trajectory in both top-line revenue and bottom-line net income, characterized by a significant acceleration in profitability toward the end of the period.
- Revenue and Net Income Trajectory
- Revenue grew steadily from US$ 168,088 million in June 2021 to US$ 331,839 million by June 2026. Parallel to this, net income increased from US$ 61,271 million to US$ 133,749 million. A period of slight stagnation in net income is observed between 2022 and 2023, where income decreased marginally from US$ 72,738 million to US$ 72,361 million despite an increase in total revenue.
- Net Profit Margin Analysis
- The net profit margin exhibited relative stability between 2021 and 2022, hovering around 36%. A contraction is observed in 2023, with the margin dipping to 34.15%, indicating that expenses grew at a faster rate than revenue during that fiscal year. A recovery phase followed in 2024 and 2025, with margins returning to 35.96% and 36.15%, respectively.
- Operational Efficiency and Margin Expansion
- A substantial increase in profitability is evident by June 2026, as the net profit margin rose to 40.31%. This peak suggests a significant improvement in operational efficiency or a shift toward higher-margin revenue streams, as net income growth accelerated more rapidly than revenue growth in the final analyzed period.
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Return on Equity (ROE)
Microsoft Corp., ROE 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 income | 133,749) | 101,832) | 88,136) | 72,361) | 72,738) | 61,271) | |
| Stockholders’ equity | 442,387) | 343,479) | 268,477) | 206,223) | 166,542) | 141,988) | |
| Profitability Ratio | |||||||
| ROE1 | 30.23% | 29.65% | 32.83% | 35.09% | 43.68% | 43.15% | |
| Benchmarks | |||||||
| ROE, Competitors2 | |||||||
| Accenture PLC | — | 24.61% | 25.68% | 26.75% | 31.11% | 30.25% | |
| Adobe Inc. | — | 61.34% | 39.42% | 32.86% | 33.85% | 32.59% | |
| AppLovin Corp. | — | 156.17% | 144.96% | 28.39% | -10.13% | 1.66% | |
| Cadence Design Systems Inc. | — | 20.26% | 22.58% | 30.58% | 30.93% | 25.39% | |
| CrowdStrike Holdings Inc. | -3.67% | -0.59% | 3.88% | -12.52% | -22.89% | -10.64% | |
| Datadog Inc. | — | 2.89% | 6.77% | 2.40% | -3.56% | -1.99% | |
| International Business Machines Corp. | — | 32.45% | 22.06% | 33.29% | 7.47% | 30.38% | |
| Intuit Inc. | — | 19.63% | 16.07% | 13.81% | 12.57% | 20.89% | |
| Oracle Corp. | 40.20% | 60.84% | 120.26% | 792.45% | — | 262.43% | |
| Palantir Technologies Inc. | — | 22.00% | 9.24% | 6.04% | -14.57% | -22.71% | |
| Palo Alto Networks Inc. | — | 14.49% | 49.86% | 25.15% | -127.14% | -78.63% | |
| Salesforce Inc. | 12.61% | 10.13% | 6.93% | 0.36% | 2.48% | 9.81% | |
| ServiceNow Inc. | — | 13.48% | 14.83% | 22.69% | 6.46% | 6.22% | |
| Synopsys Inc. | — | 4.70% | 25.17% | 20.01% | 17.85% | 14.31% | |
| Workday Inc. | 8.88% | 5.82% | 17.09% | -6.57% | 0.65% | -8.62% | |
| ROE, Sector | |||||||
| Software & Services | — | 26.75% | 28.69% | 28.33% | 30.61% | 35.77% | |
| ROE, Industry | |||||||
| Information Technology | — | 34.73% | 29.28% | 31.78% | 38.79% | 42.14% | |
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 2026 Calculation
ROE = 100 × Net income ÷ Stockholders’ equity
= 100 × 133,749 ÷ 442,387 = 30.23%
2 Click competitor name to see calculations.
An analysis of the profitability metrics reveals a divergent trend between absolute earnings growth and the efficiency of equity utilization. While both net income and stockholders' equity exhibit significant upward trajectories, the return on equity (ROE) demonstrates a general contraction over the observed period.
- Net Income Performance
- A consistent growth pattern is observed in net income, which increased from 61,271 million US dollars in 2021 to 133,749 million US dollars by 2026. This represents a substantial expansion in absolute profitability, with the most pronounced acceleration occurring between 2025 and 2026.
- Stockholders' Equity Expansion
- Stockholders' equity shows an aggressive upward trend, rising from 141,988 million US dollars in 2021 to 442,387 million US dollars in 2026. The rate of equity accumulation has consistently outpaced the growth rate of net income throughout the period.
- Return on Equity (ROE) Dynamics
- The ROE peaked at 43.68% in 2022 before entering a period of decline, reaching a low of 29.65% in 2025. A marginal recovery to 30.23% is noted in 2026. This downward trend is primarily attributable to the rapid expansion of the equity base, which has diluted the percentage return despite the simultaneous increase in total net income.
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Return on Assets (ROA)
Microsoft Corp., ROA 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 income | 133,749) | 101,832) | 88,136) | 72,361) | 72,738) | 61,271) | |
| Total assets | 758,376) | 619,003) | 512,163) | 411,976) | 364,840) | 333,779) | |
| Profitability Ratio | |||||||
| ROA1 | 17.64% | 16.45% | 17.21% | 17.56% | 19.94% | 18.36% | |
| Benchmarks | |||||||
| ROA, Competitors2 | |||||||
| Accenture PLC | — | 11.74% | 12.99% | 13.41% | 14.55% | 13.68% | |
| Adobe Inc. | — | 24.17% | 18.39% | 18.23% | 17.51% | 17.70% | |
| AppLovin Corp. | — | 45.92% | 26.92% | 6.66% | -3.30% | 0.58% | |
| Cadence Design Systems Inc. | — | 10.92% | 11.76% | 18.36% | 16.53% | 15.87% | |
| CrowdStrike Holdings Inc. | -1.47% | -0.22% | 1.34% | -3.65% | -6.49% | -3.39% | |
| Datadog Inc. | — | 1.62% | 3.18% | 1.23% | -1.67% | -0.87% | |
| International Business Machines Corp. | — | 6.97% | 4.39% | 5.55% | 1.29% | 4.35% | |
| Intuit Inc. | — | 10.47% | 9.22% | 8.58% | 7.45% | 13.29% | |
| Oracle Corp. | 6.53% | 7.39% | 7.42% | 6.33% | 6.15% | 10.48% | |
| Palantir Technologies Inc. | — | 18.26% | 7.29% | 4.64% | -10.80% | -16.02% | |
| Palo Alto Networks Inc. | — | 4.81% | 12.89% | 3.03% | -2.18% | -4.87% | |
| Salesforce Inc. | 6.64% | 6.02% | 4.14% | 0.21% | 1.52% | 6.14% | |
| ServiceNow Inc. | — | 6.71% | 6.99% | 9.96% | 2.44% | 2.13% | |
| Synopsys Inc. | — | 2.76% | 17.31% | 11.90% | 10.45% | 8.66% | |
| Workday Inc. | 3.83% | 2.93% | 8.39% | -2.72% | 0.28% | -3.24% | |
| ROA, Sector | |||||||
| Software & Services | — | 12.06% | 12.19% | 11.12% | 11.25% | 12.14% | |
| ROA, Industry | |||||||
| Information Technology | — | 15.40% | 11.91% | 12.44% | 14.47% | 14.59% | |
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 2026 Calculation
ROA = 100 × Net income ÷ Total assets
= 100 × 133,749 ÷ 758,376 = 17.64%
2 Click competitor name to see calculations.
An analysis of the profitability metrics indicates a period of significant expansion in both earnings and the asset base, though the efficiency of asset utilization has experienced fluctuations.
- Net Income Trajectory
- Net income exhibits a strong overall upward trend, increasing from 61,271 million US$ in 2021 to 133,749 million US$ by 2026. While a slight plateau occurred between 2022 and 2023, subsequent years show accelerated growth, with a particularly sharp increase observed in the final projected year.
- Total Asset Expansion
- A consistent and rapid increase in total assets is observed throughout the period. The asset base grew from 333,779 million US$ in 2021 to 758,376 million US$ in 2026, representing a substantial expansion of the company's resource base over six years.
- Return on Assets (ROA) Dynamics
- The ROA peaked at 19.94% in 2022 before entering a period of gradual decline, reaching a low of 16.45% in 2025. This compression suggests that during this interval, the growth of the asset base outpaced the growth of net income. However, a recovery is noted in 2026, with the ROA rising to 17.64%, coinciding with a significant surge in net income.
- Profitability Efficiency
- The relationship between net income and total assets indicates that while absolute profitability is increasing, the efficiency with which assets generate profit has varied. The decline in ROA through 2025 points to a period of heavy investment or asset accumulation that did not yield immediate proportional returns, followed by an improvement in efficiency in the final year of the analysis.
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