Microsoft (MSFT) AI Stock Analysis

• Market Cap: $3.34T
• Dividend Yield: 0.7%
• Average Volume (3M): 26.90M
• Price to Earnings (P/E): 34.7
• Beta (1Y): 1.05
• Revenue Growth: 14.13%
• EPS Growth: 12.10%
• Country: US
• Employees: 228,000
• Sector: Technology
• Sector Strength: 65
• Industry: Software - Infrastructure
• EPS (TTM): 3.46
• Shares Outstanding: 7,432,544,000
• 10 Day Avg. Volume: 25,507,307
• 30 Day Avg. Volume: 26,895,361
• PEG Ratio: 8.09
• Price to Book (P/B): 10.13
• Price to Sales (P/S): 0.00
• P/FCF Ratio: 47.01
• Enterprise Value/Market Cap: 0.99
• Enterprise Value/Revenue: 3.19
• Enterprise Value/Gross Profit: 17.65
• Enterprise Value/Ebitda: 5.82
• 1Y Price Target: $490.97
• Price Target Upside: 9.31% Upside
• Rating Consensus: Strong Buy
• Number of Analyst Covering: 35

Microsoft's overall stock score reflects its strong financial performance and positive earnings call driven by growth in cloud and AI services. The technical indicators present mixed signals, suggesting caution in the short term. Valuation appears high, but the company's strong financials and growth potential in key areas support a robust outlook.

Positive Factors

AI Potential

Microsoft's Azure is accelerating with AI services contributing significantly to its growth, suggesting strong future potential in AI revenue.

Cloud Growth

Azure grew 35% constant currency, marking a 3-point beat and a 4-point quarter-over-quarter acceleration.

Operating Performance

MSFT reported a strong 3Q with approximately 15% constant currency revenue growth, surpassing the Street's expectation of about 13%.

Negative Factors

CapEx and Investment

Microsoft's CapEx growth is projected to outpace its Cloud growth in the short term, indicating significant ongoing investments.

Competition and Risks

Key risks include cyclical enterprise application spending, slower-than-expected commercial cloud growth, and increasing competition, which could impact Microsoft's performance.

Guidance and Expectations

The overall guidance on operating income and revenue is slightly below expectations, indicating potential challenges ahead.

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 demonstrates strong financial performance with high profitability margins, consistent revenue growth, and a robust financial position. Effective cash flow management and a solid balance sheet highlight its ability to sustain growth and return value to shareholders.

Income Statement

Microsoft's income statement shows strong profitability with a TTM (Trailing-Twelve-Months) gross profit margin of 69.1% and a net profit margin of 35.8%. Revenue growth has been consistent, with a 10.1% increase from the previous annual report. The EBIT and EBITDA margins are robust at 45.2% and 52.4% respectively, indicating effective cost management and operational efficiency.

Balance Sheet

The balance sheet reflects a strong financial position with a low debt-to-equity ratio of 0.19, suggesting prudent leverage management. Return on Equity (ROE) is commendable at 30% in the TTM, highlighting effective use of shareholders' equity. The equity ratio of 57.2% indicates a solid capital structure, providing stability and financial flexibility.

Cash Flow

Cash flow analysis indicates a healthy cash generation capability, with a free cash flow to net income ratio of 0.72 and an operating cash flow to net income ratio of 1.35. Free cash flow growth has been strong, showcasing Microsoft's ability to generate cash after capital expenditures, supporting further investments and shareholder returns.

Breakdown
TTM	Jun 2024	Jun 2023	Jun 2022	Jun 2021	Jun 2020
Income Statement		Total Revenue
270.01B	245.12B	211.91B	198.27B	168.09B	143.01B
	Gross Profit
186.51B	171.01B	146.05B	135.62B	115.86B	96.94B
	EBIT
122.13B	109.43B	88.52B	83.38B	69.92B	52.96B
	EBITDA
150.06B	133.01B	105.14B	100.24B	85.13B	68.42B
	Net Income Common Stockholders
96.64B	88.14B	72.36B	72.74B	61.27B	44.28B
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
79.61B	75.53B	111.26B	104.75B	130.26B	136.53B
	Total Assets
562.62B	512.16B	411.98B	364.84B	333.78B	301.31B
	Total Debt
60.57B	67.13B	59.97B	61.27B	67.78B	71.00B
	Net Debt
31.74B	48.81B	25.26B	47.34B	53.55B	57.42B
	Total Liabilities
240.73B	243.69B	205.75B	198.30B	191.79B	183.01B
	Stockholders Equity
321.89B	268.48B	206.22B	166.54B	141.99B	118.30B
Cash Flow		Free Cash Flow
69.36B	74.07B	59.48B	65.15B	56.12B	45.23B
	Operating Cash Flow
130.71B	118.55B	87.58B	89.03B	76.74B	60.67B
	Investing Cash Flow
-56.88B	-96.97B	-22.68B	-30.31B	-27.58B	-12.22B
	Financing Cash Flow
-64.42B	-37.76B	-43.94B	-58.88B	-48.49B	-46.03B

Microsoft Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 449.14
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Negative
• STOCH: Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For MSFT, the sentiment is Positive. The current price of 449.14 is above the 20-day moving average (MA) of 406.19, above the 50-day MA of 392.68, and above the 200-day MA of 413.29, indicating a bullish trend. The MACD of 16.93 indicates Negative momentum. The RSI at 75.13 is Negative, neither overbought nor oversold. The STOCH value of 95.18 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for MSFT.

Microsoft Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
MSFT	84 Outperform	$3.34T	34.72	33.61%	0.70%	14.13%	12.10%
ORCL	81 Outperform	$440.88B	36.94	108.79%	1.08%	6.23%	12.37%
FTNT	80 Outperform	$78.10B	42.00	205.91%	―	13.83%	58.13%
ADBE	76 Outperform	$168.75B	26.08	47.28%	―	10.65%	44.84%
CRWD	76 Outperform	$106.96B	721.64	-0.69%	―	29.39%	-119.62%
PANW	74 Outperform	$128.12B	109.32	23.38%	―	13.86%	-46.44%
Sector *	60 Neutral	$11.39B	10.50	-6.42%	2.97%	7.77%	-11.17%

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.