Strong Return on Equity
Solid Gross Profit Margin
High Operating Profit Margin
Robust Net Profit Margin
Low Debt Levels
Strong Liquidity Ratios
💪 Strong Cloud Business
🧠 AI Revenue Surge
🔒 High Customer Retention
🚀 Continuous Innovation in AI
🌐 Global Data Center Expansion
High Price-to-Earnings Ratio
Elevated Price-to-Sales Ratio
Low Cash Ratio
⚠️ Capacity Constraints
🔄 Execution Challenges
Microsoft demonstrates strong business quality through robust cloud revenue growth, a significant increase in AI revenue, and high customer retention. However, it faces challenges with capacity constraints and execution issues that may impact near-term growth. Future prospects remain positive due to continuous innovation in AI and infrastructure expansion.
Analysis Date: January 29, 2025
Last Updated: March 12, 2025
Trailing Twelve Months (TTM) values provide a view of the company's performance over the last year.
Benjamin Graham's value investing approach focuses on finding stocks with a significant margin of safety between their intrinsic value and market price.
Intrinsic Value
Estimated fair value based on Graham's formula
$480.28
Current Market Price: $359.79
IV/P Ratio: 1.33x (>1.0 indicates undervalued)
Margin of Safety
Gap between intrinsic value and market price
25.0%
Graham recommended a minimum of 20-30% margin of safety
Higher values indicate a greater potential discount to fair value
Graham Criteria Checklist
Benjamin Graham's value investing checklist for MSFT
Positive earnings (5+ years)
Dividend history (5+ years)
P/E ratio ≤ 20 (28.85)
P/B ratio ≤ 1.5 (8.84)
Current ratio ≥ 2.0 (1.35x)
Long-term debt < Net current assets (1.49x)
Margin of safety (25.0%)
MSFT does not meet all Graham criteria
Trailing Twelve Months (TTM) values provide a view of the company's performance over the last year.
Microsoft's operating profit margin is 44.96%, showcasing excellent operational efficiency and the ability to convert revenue into profit.
The net profit margin of 35.43% indicates that Microsoft retains a significant portion of its revenues as profit, reflecting strong overall profitability.
Profitability metrics measure a company's ability to generate earnings relative to its revenue, operating costs, and other relevant metrics. Higher values generally indicate better performance.
Return on Equity (ROE)
Measures how efficiently a company uses its equity to generate profits
33.36%
Higher values indicate better returns for shareholders
TTM (as of 2025-04-16)
Return on Assets (ROA)
Measures how efficiently a company uses its assets to generate profits
4.52%
Higher values indicate better asset utilization
TTM (as of 2025-04-16)
Gross Profit Margin
Percentage of revenue retained after accounting for cost of goods sold
69.41%
Higher values indicate better efficiency in production
TTM (as of 2025-04-16)
Net Profit Margin
Percentage of revenue retained after accounting for all expenses
35.43%
Higher values indicate better overall profitability
TTM (as of 2025-04-16)
Microsoft maintains a debt-to-equity ratio of 0.21 and a debt-to-assets ratio of 0.12, indicating a conservative approach to leverage and a strong balance sheet.
With a current ratio of 1.35 and a quick ratio of 1.34, Microsoft demonstrates strong short-term liquidity, ensuring it can cover its short-term obligations.
The cash ratio of 0.16 suggests that Microsoft may have a lower immediate cash position relative to its current liabilities, which could be a concern in extreme liquidity crunches.
Financial health metrics assess a company's ability to meet its financial obligations and its overall financial stability.
Debt to Equity Ratio
Total debt divided by total equity
0.21x
Lower values indicate less financial leverage and risk
Less than 1.0 is conservative, 1.0-2.0 is moderate, >2.0 indicates high risk
Q2 2025
Current Ratio
Current assets divided by current liabilities
1.35x
Higher values indicate better short-term liquidity
Less than 1.0 is concerning, 1.0-2.0 is adequate, greater than 2.0 is good
Q2 2025
Microsoft Cloud revenue surpassed $40 billion for the first time, growing 21% year-over-year. This indicates strong demand for cloud services and positions Microsoft as a leader in the sector.
Microsoft's AI business surpassed an annual revenue run rate of $13 billion, reflecting a 175% increase year-over-year. This positions AI as a critical growth driver for the company.
The company reported a 97% annuity mix, indicating high customer retention and a stable revenue base from recurring subscriptions.
Microsoft is experiencing capacity constraints in AI, which may hinder immediate growth potential. The company must balance investments to avoid over-committing resources.
With the introduction of products like Microsoft 365 Copilot and Azure AI Foundry, Microsoft is well-positioned to capitalize on the growing demand for AI solutions, ensuring future growth.
Microsoft has doubled its data center capacity in the last three years and continues to invest in infrastructure, indicating a strong commitment to supporting future cloud and AI workloads.
There are execution issues in non-AI Azure components, indicating potential volatility in future revenue and growth rates within that segment.