Microsoft (MSFT) AI Stock Analysis

• Market Cap: $2.68T
• Dividend Yield: 0.88%
• Average Volume (3M): 24.48M
• Price to Earnings (P/E): 29.0
• Beta (1Y): 0.93
• Revenue Growth: 15.04%
• EPS Growth: 12.38%
• Country: US
• Employees: 228,000
• Sector: Technology
• Sector Strength: 40
• Industry: Software - Infrastructure
• EPS (TTM): 12.41
• Shares Outstanding: 7,433,982,400
• 10 Day Avg. Volume: 23,782,660
• 30 Day Avg. Volume: 24,484,354
• PEG Ratio: 2.34
• Price to Book (P/B): N/A
• Price to Sales (P/S): 11.11
• Price to Cash Flow (P/CF): 32.60
• P/FCF Ratio: 32.20
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $509.17
• Price Target Upside: 41.50% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 35

Microsoft's strong financial performance and positive earnings call sentiment are significant strengths, reflecting robust growth and profitability. However, high valuation metrics and technical indicators pointing to potential bearish trends present some risks. Additionally, the anticipated impairment charge impacts the financial outlook, slightly reducing the overall score.

Positive Factors

AI Integration

Ongoing AI development and integration will continue to drive growth across all key business lines, increasing revenue and cash flow growth.

Financial Position

Microsoft's strong balance sheet and cash flow will continue to fund ongoing growth initiatives and business-expanding strategic acquisitions.

Shareholder Returns

Enhanced shareholder returns through ongoing dividend increases and share repurchases.

Negative Factors

Commitment Concerns

Microsoft has withdrawn from some commitments to CoreWeave, creating concerns over CoreWeave's anticipated IPO.

Investor Sentiment

Microsoft has swung negatively in investor eyes over the past six months, transitioning from a favorite to the worst performer among peers.

Market Perception

Valuation has become significantly more attractive than when shares were downgraded in September.

Microsoft Business Overview & Revenue Model

Company Description

Microsoft 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 Money

Microsoft 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.

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.

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.

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
142.91B	133.01B	105.14B	100.24B	85.13B	68.42B
	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
39.67B	75.53B	111.26B	104.75B	130.26B	136.53B
	Total Assets
84.91B	512.16B	411.98B	364.84B	333.78B	301.31B
	Total Debt
6.00B	67.13B	59.97B	61.27B	67.78B	71.00B
	Net Debt
-2.16B	48.81B	25.26B	47.34B	53.55B	57.42B
	Total Liabilities
39.20B	243.69B	205.75B	198.30B	191.79B	183.01B
	Stockholders Equity
45.71B	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

• Technical Analysis Sentiment: Negative
• Last Price: 359.84
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

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 359.84 is below the 20-day moving average (MA) of 383.48, below the 50-day MA of 399.50, and below the 200-day MA of 419.52, indicating a bearish trend. The MACD of -5.19 indicates Negative momentum. The RSI at 42.36 is Neutral, neither overbought nor oversold. The STOCH value of 29.65 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for MSFT.

Microsoft Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
MSFT	81 Outperform	$2.68T	28.98	34.29%	0.88%	15.04%	12.38%
PANW	78 Outperform	$101.68B	86.76	23.38%	―	13.86%	-46.44%
ADBE	75 Outperform	$148.77B	22.99	47.28%	―	10.65%	44.84%
CRWD	73 Outperform	$79.72B	721.64	-0.69%	―	29.39%	-119.62%
FTNT	70 Outperform	$65.14B	37.48	338.74%	―	12.27%	54.69%
ORCL	67 Neutral	$359.70B	30.14	108.79%	1.25%	6.23%	12.37%
Sector *	57 Neutral	$18.54B	9.84	-14.38%	2.71%	5.07%	-23.65%

Microsoft Corporate Events

Microsoft EVP Christopher D. Young Resigns

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.