Microsoft Corp. (NASDAQ:MSFT)

The profitability ratios demonstrate a generally positive trend over the observed period, with some fluctuations. Gross profit margin, operating profit margin, and net profit margin all exhibited growth from September 2020 through the end of 2021, followed by a period of stabilization and, in some cases, slight decline before resuming an upward trajectory towards the end of the period. Return on equity (ROE) and return on assets (ROA) followed a similar pattern, peaking around March 2022 and then experiencing a gradual decline before showing signs of recovery in the most recent quarters.

Gross Profit Margin

The gross profit margin consistently remained high, fluctuating between approximately 68% and 70% throughout the period. An initial increase from 68.27% in September 2020 to 68.93% in June 2021 was followed by a slight dip, then a recovery to 69.89% in March 2024. The most recent quarters show a slight decrease, ending at 68.59% in March 2025.

Operating Profit Margin

The operating profit margin showed a more pronounced upward trend, increasing from 38.17% in September 2020 to a peak of 44.70% in March 2024. A subsequent decline to 44.49% in September 2024 was followed by a recovery to 45.62% in June 2025, indicating strong operational efficiency improvements over the period.

Net Profit Margin

The net profit margin mirrored the trend of the operating profit margin, rising from 32.29% in September 2020 to 39.04% in March 2025. A notable dip occurred in September 2022 (34.37%) and December 2022 (33.05%), but the margin generally improved over time, suggesting effective cost management and revenue generation. The final reported value is 36.15% in June 2025.

Return on Equity (ROE)

ROE demonstrated a strong initial increase, peaking at 44.67% in September 2021. A consistent decline followed, reaching a low of 28.90% in September 2025. This suggests a potential decrease in the efficiency with which equity is being used to generate profits, or a change in the company’s capital structure. However, the most recent quarter shows a recovery to 30.51% in March 2025.

Return on Assets (ROA)

ROA followed a similar trajectory to ROE, increasing from 15.78% in September 2020 to 21.03% in March 2022, then declining to 16.49% in September 2025. The final reported value is 17.93% in March 2025, indicating a slight improvement in asset utilization efficiency. The decline in both ROE and ROA suggests a potential need to re-evaluate asset allocation and capital management strategies.

Overall, the observed profitability ratios indicate a company that has generally improved its profitability over the period, although recent quarters show some signs of stabilization or slight decline in certain metrics. The increases in gross, operating, and net profit margins suggest effective cost control and revenue generation. The fluctuations in ROE and ROA warrant further investigation to understand the underlying drivers and potential implications for long-term financial performance.

The gross profit margin exhibited a generally stable pattern over the analyzed period, spanning from September 2020 to December 2025. While fluctuations occurred, the metric largely remained within a narrow range, indicating consistent production efficiency and pricing strategies. A slight upward trend is discernible in the latter half of the period, suggesting potential improvements in cost management or a shift towards higher-margin products.

Overall Trend

The gross profit margin demonstrated relative stability, fluctuating between approximately 68.16% and 69.89% throughout the observed timeframe. The initial values, beginning in September 2020, hovered around 68.27% to 68.38%. A modest increase is then observed, peaking at 69.89% in March 2024, before experiencing a slight decline towards the end of the period.

Short-Term Fluctuations

Within the overall stability, quarterly variations were present. A dip in the gross profit margin occurred between June 2022 (68.40%) and December 2022 (68.16%). Conversely, a noticeable increase occurred between March 2023 (68.45%) and December 2023 (69.75%). These fluctuations likely correlate with changes in product mix, input costs, or promotional activities.

Long-Term Perspective

Comparing the beginning of the period (September 2020) to the end (December 2025), the gross profit margin increased from 68.27% to 68.59%. This represents a modest, but positive, long-term trend. The most significant gains were observed between 2023 and 2024, indicating a period of enhanced profitability. The final quarter shows a slight decrease, but remains within the historical range.

Relationship to Revenue

The gross profit margin remained relatively consistent despite fluctuations in revenue. Revenue increased substantially over the period, from US$37.154 billion to US$81.273 billion, yet the gross profit margin remained largely unaffected, suggesting effective scaling of operations and cost control. The correlation between revenue and gross profit margin appears weak, indicating that revenue growth does not necessarily impact the percentage of revenue retained as gross profit.

In conclusion, the gross profit margin demonstrates a pattern of stability with a subtle upward trajectory. The company appears to maintain consistent profitability in its core operations, effectively managing costs and pricing despite revenue fluctuations. Continued monitoring of this metric, alongside detailed analysis of underlying cost structures, is recommended to sustain and potentially enhance profitability.

The operating profit margin exhibited a generally increasing trend over the observed period, spanning from September 2020 to December 2025. While fluctuations occurred, the overall trajectory indicates improving profitability from operations. Initial values were in the high 38% range, culminating in values exceeding 46% by the end of the period.

Initial Phase (Sep 2020 – Dec 2021)

From September 2020 through December 2021, the operating profit margin demonstrated consistent growth. It rose from 38.17% to 42.52%, indicating a steady improvement in the company’s ability to generate profit from its core operations. This period suggests effective cost management or increasing pricing power.

Plateau and Slight Decline (Mar 2022 – Sep 2022)

Following the peak in December 2021, the operating profit margin experienced a slight plateau and subsequent decline through September 2022. The margin decreased from 42.52% to 41.69%. This suggests potential increases in operating expenses or a softening of revenue growth during this timeframe.

Recovery and Continued Growth (Dec 2022 – Dec 2025)

From December 2022 onwards, the operating profit margin resumed its upward trend, accelerating in the later quarters. The margin increased from 40.58% to 46.67% by December 2025. This indicates a successful implementation of strategies to improve operational efficiency and profitability. The rate of increase appears to be accelerating towards the end of the period.

Quarterly Volatility

Despite the overall upward trend, quarterly variations were present. For example, a dip was observed between December 2021 and March 2022, and again between September 2022 and December 2022. These fluctuations suggest sensitivity to seasonal factors or short-term economic conditions. However, these dips were consistently followed by recovery.

The consistent expansion of the operating profit margin over the majority of the analyzed period suggests strong underlying operational performance and effective financial management. The recent acceleration in margin improvement is a positive indicator for future profitability.

The net profit margin exhibited a generally increasing trend from the September 2020 period through the September 2021 period, followed by a period of fluctuation and then a significant increase towards the end of the observed timeframe. Initial values were in the low thirties percentage range, culminating in a substantial rise to approximately 39% by March 2025.

Initial Growth Phase (Sep 2020 – Sep 2021)

The net profit margin demonstrated consistent growth, increasing from 32.29% in September 2020 to 38.51% in September 2021. This indicates improving profitability during this period, potentially driven by revenue growth and/or effective cost management.

Period of Fluctuations (Dec 2021 – Jun 2022)

Following the peak in September 2021, the net profit margin experienced a period of relative instability. It decreased to 38.50% in December 2021, then fluctuated between 37.63% and 33.05% through June 2022. This suggests potential pressures on profitability, possibly related to increased operating expenses or shifts in revenue mix.

Stabilization and Subsequent Increase (Jul 2022 – Mar 2024)

From July 2022 through March 2024, the net profit margin largely stabilized, oscillating between approximately 33% and 36%. While not exhibiting strong growth, this period indicates a consolidation of profitability after the earlier fluctuations.

Significant Improvement (Apr 2024 – Jun 2025)

A notable upward trend emerged beginning in April 2024. The net profit margin increased from 35.96% in June 2024 to 39.04% in March 2025, and further to 36.15% in June 2025. This substantial improvement suggests a significant enhancement in profitability, potentially due to factors such as increased operational efficiency, favorable pricing strategies, or a shift towards higher-margin products or services. The final reported value of 39.04% represents the highest net profit margin observed throughout the analyzed period.

Overall, the observed pattern indicates a company that has generally improved its profitability over the analyzed period, with a particularly strong performance in the most recent quarters. The fluctuations in the earlier periods suggest sensitivity to external factors or internal operational changes, while the recent upward trend points to successful strategies for enhancing profitability.

The Return on Equity (ROE) demonstrates a generally declining trend over the observed period, although with considerable fluctuation. Initially, the metric exhibits growth, followed by a period of stabilization and then a consistent decrease. Net income and stockholders’ equity both increased over the period, but the rate of increase in equity outpaced that of net income, contributing to the ROE decline.

Initial Growth (Sep 30, 2020 – Jun 30, 2021)

From September 30, 2020, to June 30, 2021, ROE increased from 38.49% to 43.15%. This growth coincided with increases in both net income and stockholders’ equity. The rate of increase in net income was particularly strong during this period, driving the ROE improvement.

Stabilization (Jul 31, 2021 – Mar 31, 2022)

Following the peak in June 2021, ROE remained relatively stable, fluctuating between 44.49% and 44.67% for several quarters. Both net income and stockholders’ equity continued to grow, but at a more moderate pace, resulting in the stabilization of ROE.

Declining Trend (Apr 01, 2022 – Dec 31, 2023)

Beginning in March 2022, ROE began a consistent downward trend, decreasing from 44.47% to 34.64% by December 2023. While net income continued to increase overall, the growth in stockholders’ equity consistently exceeded it, diluting the return to shareholders. This suggests a significant reinvestment of earnings or other equity-increasing activities.

Continued Decline and Recent Stabilization (Jan 01, 2024 – Jun 30, 2025)

The decline in ROE continued into early 2024, reaching a low of 28.90% in September 2024. However, the most recent quarters show a slight stabilization, with ROE increasing to 30.51% in March 2025 and 30.51% in June 2025. Net income experienced a substantial increase in the most recent period, partially offsetting the dilution from equity growth.

Overall, the observed trend suggests that while the company continues to generate substantial net income, the increasing equity base is moderating the return to shareholders. The recent stabilization in ROE warrants further investigation to determine if this represents a turning point or a temporary fluctuation.

The Return on Assets (ROA) exhibits a generally increasing trend over the observed period, followed by a period of stabilization and a recent increase. Initial values demonstrate a rise from 15.78% in September 2020 to a peak of 21.03% in March 2022. Subsequent quarters show a slight decline, leveling off in the range of 17.18% to 18.16% through December 2023. The most recent quarters indicate a renewed upward trajectory, culminating in 17.93% in March 2025.

Overall Trend

The ROA generally improved from late 2020 through early 2022, suggesting increasing efficiency in utilizing assets to generate profit. The subsequent plateau indicates a stabilization of this efficiency. The recent increase suggests a renewed improvement in asset utilization.

Peak Performance

The highest ROA values were consistently observed between March 2021 and March 2022, ranging from 18.13% to 21.03%. This period represents the company’s strongest performance in terms of asset profitability during the analyzed timeframe.

Period of Stabilization

From June 2022 through December 2023, the ROA remained relatively stable, fluctuating within a narrow range. This suggests that while profitability remained consistent, there was no significant improvement in how effectively assets were being employed. The values during this period were consistently below the peak levels achieved in 2021 and early 2022.

Recent Improvement

The final four quarters demonstrate a clear upward trend in ROA, increasing from 17.54% in March 2024 to 17.93% in March 2025. This suggests a positive shift in asset utilization and profitability in the most recent period.

Relationship to Net Income and Total Assets

The ROA trend closely follows the trends in both net income and total assets. Increases in net income, coupled with moderate growth in total assets, contributed to the initial rise in ROA. The stabilization of ROA coincided with a period where net income growth was more moderate, and asset growth was more substantial. The recent ROA increase is linked to a more significant increase in net income relative to asset growth.