What the company does 💻
Microsoft Corporation (MSFT) builds and sells cloud computing (Azure), productivity software (Microsoft 365/Office, Teams, LinkedIn, Dynamics), Windows & devices, gaming (Xbox, Activision Blizzard), and AI platforms (Copilot, OpenAI integrations). Results are reported in three segments: Intelligent Cloud, Productivity and Business Processes, and More Personal Computing.
Financial Highlights 📊
- FY2025 revenue: ~$270B; net income: ~$102B.
- Cash flow from operations exceeded net income, supporting AI data-center capex, dividends, and buybacks.
- Strength was broad-based: Azure and AI led growth; Microsoft 365/LinkedIn and gaming contributed.
Key Risks ⚠️
- Regulatory & antitrust scrutiny across cloud, software bundling, and AI.
- Cloud reliability & capacity needs (data-center build-out, power, chips).
- Cybersecurity threats and software vulnerabilities.
- AI risks (accuracy, copyright, evolving rules) and partner reliance (e.g., OpenAI).
MD&A (What management emphasized) 🧭
- Ongoing AI integration across Azure and Microsoft 365 (Copilot) as core growth driver.
- Operating discipline: margins improved despite heavy AI investment.
- Capital allocation: fund AI infrastructure while maintaining strong balance sheet and shareholder returns.
Takeaway ✅
Microsoft’s 2025 10-K presents a diversified, cash-generating platform centered on cloud + AI. The company highlights continued adoption of AI across products, supported by robust cash flows, while noting risks tied to regulation, security, and cloud scale.
📈 Key Financial Ratios
| Ratio | 2023 | 2024 | 2025 |
|---|---|---|---|
| ROE (%) | 38.5 | 38.9 | 40.2 |
| ROA (%) | 20.0 | 21.1 | 21.6 |
| ROTC (%) | 25.3 | 26.4 | 27.2 |
| ROIC (%) | 26.0 | 27.1 | 27.8 |
| Gross Margin (%) | 65.2 | 64.2 | 64.4 |
| Operating Margin (%) | 41.8 | 39.5 | 39.8 |
| Pretax Margin (%) | 41.1 | 38.7 | 39.1 |
| Net Margin (%) | 32.6 | 35.7 | 37.7 |
| Debt-to-Equity (%) | 48.0 | 46.5 | 44.2 |
| Net Debt / EBITDA (x) | 0.4 | 0.3 | 0.2 |
| Interest Coverage (x) | 38.5 | 40.3 | 42.0 |
| Current Ratio (%) | 180.0 | 184.0 | 187.0 |
| Quick Ratio (%) | 158.0 | 161.0 | 165.0 |
| Fixed Asset / LT Capital (%) | 24.8 | 25.0 | 25.5 |
📝 Disclaimer
This article is intended for educational purposes only. It does not constitute financial, investment, or legal advice. All investment decisions involve risks, and readers should conduct their own research or consult with a licensed financial advisor.