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Microsoft (MSFT)
NASDAQ:MSFT
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Microsoft
(NASDAQ:MSFT)81Outperform
Positive Factors
AI Infrastructure
Microsoft remains committed to building AI infrastructure for the long haul.
Profitability
Microsoft achieved better-than-expected profitability with an operating margin of 45.5%, surpassing the implied guidance.
Negative Factors
Azure Growth
Azure's growth fell at the low end of guidance due to go-to-market execution issues and capacity constraints, impacting its reacceleration in the second half.
Microsoft (MSFT) vs. S&P 500 (SPY)
Market Cap
$2.89T
Dividend Yield0.8%
Average Volume (3M)24.80M
Price to Earnings (P/E)31.3
Beta (1Y)1.06
Revenue Growth15.04%
EPS Growth12.38%
CountryUS
Employees228,000
SectorTechnology
Sector Strength48
IndustrySoftware
Share Statistics
EPS (TTM)12.41
Shares Outstanding7,433,982,400
10 Day Avg. Volume25,669,088
30 Day Avg. Volume24,798,239
Financial Highlights & Ratios
PEG Ratio2.53
Price to Book (P/B)N/A
Price to Sales (P/S)11.03
Price to Cash Flow (P/CF)32.40
P/FCF Ratio32.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$508.96Price Target Upside30.97% Upside
Rating ConsensusStrong Buy
Number of Analyst Covering31
Microsoft Business Overview & Revenue Model
Company DescriptionMicrosoft Corporation is a leading global technology company, headquartered in Redmond, Washington. It operates in several sectors, including software development, cloud computing, hardware, and digital services. The company's core products and services include the Windows operating system, Microsoft Office productivity suite, Azure cloud services, Xbox gaming consoles, and LinkedIn professional networking platform. Microsoft is known for its innovation in personal computing, enterprise software solutions, and cloud technologies, consistently pushing boundaries to enhance user experience and business productivity.
How the Company Makes MoneyMicrosoft makes money through a diverse array of revenue streams, primarily categorized into three business segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. The Productivity and Business Processes segment includes revenue from Microsoft Office products, LinkedIn, and Microsoft Dynamics. The Intelligent Cloud segment generates income from Azure cloud services, server products, and enterprise services. More Personal Computing encompasses sales from Windows operating system licenses, Xbox gaming hardware and content, Surface devices, and advertising through Bing. Significant partnerships with enterprise clients and continuous innovation in cloud and AI technologies further bolster Microsoft's earnings. The company leverages subscription models, licensing fees, and transaction-based revenues to maintain a robust financial performance.
Microsoft Financial Statement Overview
Summary
Microsoft exhibits outstanding financial performance with strong profitability and growth, supported by robust cash flows and a conservative balance sheet. The income statement, balance sheet, and cash flow statement all indicate a healthy financial position.Income Statement
Microsoft's TTM (Trailing-Twelve-Months) income statement showcases impressive financial health with a gross profit margin of 69.4% and a net profit margin of 35.4%. Revenue has consistently grown, with a 6.8% increase from the previous annual period. The EBIT and EBITDA margins are strong, at 44.9% and 52.6% respectively, indicating efficient operations and robust profitability.95
Very Positive
Balance Sheet
The balance sheet demonstrates a solid financial position with a debt-to-equity ratio of 0.21, indicating low leverage. The return on equity (ROE) is a healthy 30.6%, reflecting effective capital utilization. The equity ratio stands at 56.7%, showing a strong equity base relative to total assets, which enhances financial stability.90
Very Positive
Cash Flow
Microsoft's cash flow statement reveals positive trends, with a free cash flow growth rate of 5.3% in the TTM. The operating cash flow to net income ratio is 1.35, suggesting strong cash generation relative to net income. The free cash flow to net income ratio is 0.76, highlighting efficient conversion of earnings to free cash flow.92
Very Positive
| Breakdown | |||||
| TTM | Jun 2024 | Jun 2023 | Jun 2022 | Jun 2021 | Jun 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 261.80B | 245.12B | 211.91B | 198.27B | 168.09B | 143.01B | Gross Profit |
| 181.72B | 171.01B | 146.05B | 135.62B | 115.86B | 96.94B | EBIT |
| 117.71B | 109.43B | 88.52B | 83.38B | 69.92B | 52.96B | EBITDA |
| 142.93B | 133.01B | 105.14B | 100.24B | 84.35B | 67.93B | Net Income Common Stockholders |
| 92.75B | 88.14B | 72.36B | 72.74B | 61.27B | 44.28B |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 75.53B | 75.53B | 111.26B | 104.75B | 130.26B | 136.49B | Total Assets |
| 512.16B | 512.16B | 411.98B | 364.84B | 333.78B | 301.31B | Total Debt |
| 67.13B | 67.13B | 79.44B | 78.40B | 82.28B | 82.11B | Net Debt |
| 48.81B | 48.81B | 44.74B | 64.47B | 68.05B | 68.53B | Total Liabilities |
| 243.69B | 243.69B | 205.75B | 198.30B | 191.79B | 183.01B | Stockholders Equity |
| 268.48B | 268.48B | 206.22B | 166.54B | 141.99B | 118.30B |
| Cash Flow | Free Cash Flow | ||||
| 70.03B | 74.07B | 59.48B | 65.15B | 56.12B | 45.23B | Operating Cash Flow |
| 125.58B | 118.55B | 87.58B | 89.03B | 76.74B | 60.67B | Investing Cash Flow |
| -54.86B | -96.97B | -22.68B | -30.31B | -27.58B | -12.22B | Financing Cash Flow |
| -70.19B | -37.76B | -43.94B | -58.88B | -48.49B | -46.03B |
Microsoft Technical Analysis
Negative
388.61
Price Trends
419.29
Negative
421.75
Negative
424.09
Negative
Market Momentum
-8.20
Positive
32.68
Neutral
19.58
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For MSFT, the sentiment is Negative. The current price of 388.61 is below the 20-day moving average (MA) of 405.54, below the 50-day MA of 419.29, and below the 200-day MA of 424.09, indicating a bearish trend. The MACD of -8.20 indicates Positive momentum. The RSI at 32.68 is Neutral, neither overbought nor oversold. The STOCH value of 19.58 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for MSFT.
Microsoft Risk Analysis
Microsoft disclosed 27 risk factors in its most recent earnings report. Microsoft reported the most risks in the “Legal & Regulatory” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Microsoft Peers Comparison
Overall Rating
UnderperformOutperform
Sector (59)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
82 Outperform | $2.16T | 36.91 | 20.72% | ― | 10.99% | 91.61% | |
81 Outperform | $2.89T | 31.30 | 30.64% | 0.80% | 15.04% | 12.38% | |
76 Outperform | $3.54T | 37.51 | 144.03% | 0.53% | 2.61% | -2.14% | |
75 Outperform | $440.44B | 38.54 | 84.57% | 0.99% | 6.40% | 12.83% | |
74 Outperform | $2.09T | 21.17 | 30.80% | 0.35% | 13.89% | 38.99% | |
67 Neutral | $234.79B | 39.40 | 22.06% | 2.65% | 1.45% | -20.56% | |
59 Neutral | $22.39B | 11.53 | -18.05% | 2.31% | 5.00% | -25.89% |
* Technology Sector Average
Performance Comparison
MSFT
Microsoft
388.61
-10.99
-2.75%
AMZN
Amazon
203.80
29.68
17.05%
AAPL
Apple
235.93
66.61
39.34%
GOOGL
Alphabet Class A
170.92
38.73
29.30%
IBM
International Business Machines
253.21
67.51
36.35%
ORCL
Oracle
157.47
47.72
43.48%
Microsoft Earnings Call Summary
Earnings Call Date: Jan 29, 2025 | % Change Since: -11.97% | Next Earnings Date: Apr 29, 2025
Earnings Call Sentiment Neutral
The earnings call highlights Microsoft's strong performance in cloud and AI services, with record commercial bookings and significant growth in AI and cloud revenue. However, there were challenges in Azure non-AI services and declines in gaming and on-premises server revenues. The sentiment is balanced with notable achievements in cloud and AI offset by specific underperformances.Highlights
Microsoft Cloud Revenue Surpasses $40 Billion
Microsoft Cloud revenue reached over $40 billion, growing 21% year-over-year, marking continued strength and growth in cloud services.
AI Business Annual Revenue Run Rate Hits $13 Billion
Microsoft's AI business surpassed an annual revenue run rate of $13 billion, growing 175% year-over-year, driven by enterprise-wide deployments of AI solutions.
Record Commercial Bookings
Commercial bookings increased 67%, or 75% in constant currency, significantly ahead of expectations, driven by large Azure commitments from OpenAI.
Growth in Microsoft 365 Copilot Adoption
Microsoft 365 Copilot saw accelerated customer adoption with a significant increase in seats and usage intensity, expanding seats by more than 10x over 18 months.
LinkedIn Premium Revenue Surpasses $2 Billion
LinkedIn Premium achieved over $2 billion in annual revenue, with subscriber growth increasing nearly 50% over the past two years.
Lowlights
Azure Non-AI Services Underperformance
Azure non-AI services growth was slightly lower than expected due to go-to-market execution challenges, particularly with scale motions reaching customers through partners.
Gaming Revenue Decline
Gaming revenue decreased by 7%, affected by hardware declines, although Xbox content and services revenue increased by 2%.
On-Premises Server Revenue Decline
On-premises server revenue decreased by 3%, slightly below expectations, driven by slower than expected purchasing around Windows Server 2025 launch.
Enterprise and Partner Services Revenue Decline
Enterprise and Partner Services revenue decreased by 1%, below expectations, with lower performance across Enterprise Support Services and Industry Solutions.
Company Guidance
During the Microsoft Fiscal Year 2025 Second Quarter Earnings Conference Call, the company provided guidance that highlighted significant growth across various metrics. Microsoft Cloud revenue exceeded $40 billion for the first time, marking a 21% year-over-year increase. The AI business demonstrated remarkable performance, surpassing an annual revenue run rate of $13 billion with a 175% year-over-year growth. The company also reported strong commercial bookings, which increased by 67%, with commercial remaining performance obligations reaching $298 billion, reflecting a 34% rise. Microsoft 365 Commercial Cloud revenue grew by 16%, LinkedIn revenue increased by 9%, and Dynamics 365 revenue rose by 19%. The call also noted a 70% gross margin percentage for Microsoft Cloud and the successful expansion of data center capacity over the past three years, further supporting Microsoft's strategic focus on AI and cloud infrastructure.Microsoft Corporate Events
Executive/Board ChangesBusiness Operations and Strategy
Microsoft EVP Christopher D. Young Resigns
Neutral
Jan 22, 2025
On January 22, 2025, Christopher D. Young announced his resignation from Microsoft, where he held the position of Executive Vice President, Business Development, Strategy, and Ventures. His immediate departure from this role will see him continue with the company until the end of March to assist with the transition, potentially impacting Microsoft’s strategic operations and stakeholder relations.
Shareholder MeetingsFinancial Disclosures
Microsoft Shareholders Meeting and Financial Outlook Update
Negative
Dec 11, 2024
Microsoft held its 2024 Annual Shareholders Meeting, where shareholders approved the election of all 12 director nominees and the executive compensation, while rejecting several shareholder proposals including those related to AI and bitcoin investments. Additionally, Microsoft’s financial outlook is impacted by GM’s decision to realign its autonomous driving strategy, leading to an expected $800 million impairment charge in the second quarter of fiscal year 2025, affecting earnings per share.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.