Microsoft Corporation FY2024 Net Income $88.1B Up 22%

Executive Summary

Microsoft Corporation reported robust financial performance for FY2024, with net income reaching $88.1 billion, reflecting a 22% increase compared to the previous fiscal year. This surge in net profit is the most significant YoY change among key metrics, driven by strong revenue growth across segments and efficient cost management. The company’s strategic focus on cloud computing, enterprise solutions, and gaming has contributed to sustained revenue expansion. The balance sheet demonstrates solid liquidity with total assets of $512.2 billion, while leverage remains moderate with long-term debt at $42.7 billion. Cash flow from operations remained healthy at approximately $118.5 billion, supporting ongoing investments and shareholder returns. This report provides a comprehensive analysis of financial metrics, ratios, and strategic outlook, offering valuable insights for investors and stakeholders.

Key Metrics (Historical Comparisons)

Management Discussion and Analysis

Revenue Growth Drivers

Microsoft’s revenue growth of 15.7% in FY2024 primarily stems from the expansion of cloud services, including Azure and Office 365, which together contributed significantly to total sales. The company’s strategic investments in enterprise solutions, AI, and gaming have also bolstered revenue streams. The increase in revenue from server products and cloud services alone was approximately 22.2%, indicating robust demand for Microsoft’s cloud infrastructure and platform offerings.

Profitability and Cost Management

The net income increase of 22% reflects improved operational efficiencies and revenue leverage. Gross margins improved by 17.1%, driven by higher-margin cloud services and software sales. Operating expenses increased marginally, supported by disciplined R&D and marketing investments, ensuring continued innovation and market competitiveness.

Balance Sheet and Liquidity

Assets grew by 24.4%, reaching $512.2 billion, with cash and cash equivalents at $18.3 billion and short-term investments totaling $57.2 billion. Total liabilities increased slightly to $243.7 billion, with long-term debt stable at $42.7 billion, maintaining a healthy debt-to-equity ratio. Shareholders’ equity surged by 30%, reflecting retained earnings and share repurchases.

Cash Flow and Shareholder Returns

Cash flows from operations increased by 35.2% to $118.5 billion, enabling the company to continue returning value through dividends and share buybacks. During FY2024, Microsoft paid dividends totaling $22.3 billion and repurchased $11.96 billion worth of shares, demonstrating confidence in sustained growth and shareholder value.

Income Statement Analysis

Revenue and Gross Profit

Revenue increased from $211.9 billion in FY2023 to $245.1 billion in FY2024, with notable growth across every segment. Gross profit rose by 17.1%, reflecting higher sales and improved margins. Operating income also grew robustly by 23.6%, reaching $109.4 billion, underpinning the company’s operational efficiency.

Net Income and EPS

Net income of $88.1 billion marked a 22% increase YoY, with diluted EPS rising from $9.68 to $11.80, a 21.8% increase, indicating strong earnings leverage and effective share repurchase programs.

Balance Sheet Analysis

Assets and Liquidity

Assets increased to $512.2 billion, driven by higher cash, investments, and goodwill. Cash and short-term investments totaled $75.5 billion, providing ample liquidity for strategic investments and shareholder returns. Total liabilities increased modestly, with debt remaining manageable relative to assets and equity.

Debt and Shareholders’ Equity

Long-term debt was stable at $42.7 billion, and shareholders’ equity grew by 30%, reaching $268.5 billion, reflecting retained earnings and share repurchases. The debt-to-equity ratio remains conservative, supporting financial flexibility.

Cash Flow Analysis

Operating, Investing, and Financing

Operating cash flow soared by 35.2% to $118.5 billion, driven by higher net income and working capital improvements. Capital expenditures increased to support data center expansion, with capex at approximately $44.5 billion. Share repurchases totaled $11.96 billion, and dividends amounted to $22.3 billion, reinforcing shareholder value.

Ratios & DuPont Analysis

Net margin improved to 36% from 34%, ROA increased to 17.2%, and ROE rose to 33%, reflecting profitability leverage. Asset turnover remained stable at 0.48, and the equity multiplier was 1.91, indicating efficient asset utilization and strong equity base.

Risk Factors

Key risks include regulatory scrutiny over data privacy and antitrust concerns, competitive pressures from tech giants, market volatility, macroeconomic uncertainties, and operational risks related to global supply chains and data security. Ongoing legal and compliance issues, particularly around data regulation and international tax audits, also pose potential challenges.

Notes & Additional Commentary

Microsoft’s FY2024 results benefited from favorable foreign exchange impacts and gains from strategic acquisitions. Notably, the acquisition of Activision Blizzard for $75.4 billion significantly increased goodwill, which remains unimpaired. The company’s focus on cloud and AI innovation positions it well for long-term growth, although geopolitical and regulatory environments require vigilant management.

Investment Implications

The company presents a balanced outlook with strong revenue growth, solid cash generation, and prudent financial management. Short-term opportunities include leveraging cloud and AI advancements, while long-term risks involve regulatory scrutiny and market competition. Investors should consider Microsoft’s resilient business model and strategic positioning as a core holding in the technology sector.