Analysis of the Form 10-K | Fiscal year ended 30 June 2025
FY2025, ended 30 June 2025. Reporting currency: US dollars (US$). Amounts in US$ millions (mn) unless otherwise stated. Market data external to the document: closing price of US$ 497.41 on 30 June 2025. Shares outstanding: 7,433,166,379 on 24 July 2025 (10-K cover page). Market capitalization = 497.41 × 7,433,166,379 = US$ 3,697.33 billion (3,697,331 mn).
Microsoft sells software, cloud services, content, advertising and devices to consumers, small and large businesses, public bodies, developers and OEMs. Cash comes in four forms: cloud subscriptions recognized ratably (Microsoft 365, Dynamics 365, LinkedIn), consumption of computing resources (Azure), on-premises licenses recognized on delivery, and advertising plus sales of hardware and games. The channels are direct sales through Enterprise Agreements and Microsoft Customer Agreements, resellers and distributors, and OEMs that pre-install Windows; among these the document names Dell, Hewlett-Packard and Lenovo. Multi-year contracts are generally invoiced annually at the start of each coverage period. This is the main component of unearned revenue, which stood at 67,265 mn at year-end.
The document defines three segments, reorganized in August 2024 with prior years recast. Productivity and Business Processes includes Microsoft 365 Commercial and Consumer, LinkedIn and Dynamics. Intelligent Cloud includes Azure, server products, GitHub, Nuance and enterprise services. More Personal Computing includes Windows OEM, Surface, Xbox (including Activision Blizzard from 13 October 2023) and search and news advertising.
Revenue by segment:
| Segment | FY2025 | % of total | FY2024 | FY2023 | YoY 25/24 | YoY 24/23 |
|---|---|---|---|---|---|---|
| Productivity and Business Processes | 120,810 | 42.9% | 106,820 | 94,151 | +13.1% | +13.5% |
| Intelligent Cloud | 106,265 | 37.7% | 87,464 | 72,944 | +21.5% | +19.9% |
| More Personal Computing | 54,649 | 19.4% | 50,838 | 44,820 | +7.5% | +13.4% |
| Total | 281,724 | 100.0% | 245,122 | 211,915 | +14.9% | +15.7% |
Revenue by product line (Note 18):
| Line | FY2025 | % of total | FY2024 | FY2023 | YoY 25/24 | YoY 24/23 |
|---|---|---|---|---|---|---|
| Server products and cloud services | 98,435 | 34.9% | 79,828 | 65,007 | +23.3% | +22.8% |
| Microsoft 365 Commercial | 87,767 | 31.2% | 76,969 | 66,949 | +14.0% | +15.0% |
| Gaming | 23,455 | 8.3% | 21,503 | 15,466 | +9.1% | +39.0% |
| 17,812 | 6.3% | 16,372 | 14,989 | +8.8% | +9.2% | |
| Windows and Devices | 17,314 | 6.1% | 17,026 | 17,147 | +1.7% | −0.7% |
| Search and news advertising | 13,878 | 4.9% | 12,306 | 12,125 | +12.8% | +1.5% |
| Dynamics | 7,827 | 2.8% | 6,831 | 5,796 | +14.6% | +17.9% |
| Enterprise and partner services | 7,760 | 2.8% | 7,594 | 7,900 | +2.2% | −3.9% |
| Microsoft 365 Consumer | 7,404 | 2.6% | 6,648 | 6,417 | +11.4% | +3.6% |
| Other | 72 | 0.0% | 45 | 119 | n.m. | n.m. |
| Total | 281,724 | 100.0%* | 245,122 | 211,915 | +14.9% | +15.7% |
*Sum of rounded percentages: 99.9%.
Revenue by geographic area:
| Area | FY2025 | % of total | FY2024 | FY2023 | YoY 25/24 | YoY 24/23 |
|---|---|---|---|---|---|---|
| United States | 144,546 | 51.3% | 124,704 | 106,744 | +15.9% | +16.8% |
| Other countries | 137,178 | 48.7% | 120,418 | 105,171 | +13.9% | +14.5% |
| Total | 281,724 | 100.0% | 245,122 | 211,915 | +14.9% | +15.7% |
According to footnote (a), the United States line includes "billings to OEMs and certain multinational organizations", so it overstates the domestic share by an amount the document does not quantify. No customer and no country other than the United States exceeds 10% of revenue.
At 30 June 2025 there were approximately 228,000 full-time employees, of whom 125,000 were in the United States. The document does not report the figure for prior years.
The main signatories of the 10-K are Satya Nadella (Chairman and CEO), Amy E. Hood (CFO) and Alice L. Jolla (Chief Accounting Officer). Among the executive officers, in March 2025 Amy L. Coleman became Chief Human Resources Officer and Kathleen T. Hogan moved to the Office of Strategy and Transformation. The document does not name the prior year's signatories, so a change of signatories cannot be verified.
Items the document places in this fiscal year: the new segment composition and the new Microsoft 365 Commercial cloud growth metric; adoption of the FASB standard on segment disclosures; application of OECD Pillar Two "beginning in fiscal year 2025"; the One Big Beautiful Bill Act, enacted on 4 July 2025, that is after year-end but before signing; among the risks, the volatility of US tariffs and the AI Diffusion Rule, "recently rescinded". The document does not contain the text of the prior year's risk factors, so it does not allow one to establish which ones were added.
The document identifies three sources of advantage in the cloud: datacenters with lower unit costs than smaller ones, aggregation of diverse demand that raises resource utilization, and multi-tenancy that lowers application maintenance costs. Microsoft Cloud revenue is 168.9 billion. It accounts for 60.0% of total revenue (168.9 / 281.7 billion = 60.0%). The second element is the ecosystem. In the risk factors on platforms, the document notes that users "may incur costs to move data and buy new content and applications when switching platforms": the switching cost protects the installed base.
Segment profitability is consistent with this reading. The operating margin of Productivity and Business Processes rose to 57.8% in FY2025. Calculation: 69,773 / 120,810 = 57.8%. In FY2024 and FY2023 it was 55.9% and 53.2% respectively. The document, however, also acknowledges the limits of the advantage: "Barriers to entry in many of our businesses are low", and in AI the competitors are "many of which are also current or potential partners".
The relationship with OpenAI is both an advantage and a dependency. The document states that the OpenAI API "is exclusive to Azure" and that Microsoft holds "a right of first refusal on OpenAI's new capacity needs". Funding commitments amount to 13 billion, accounted for under the equity method.
The document does not publish average prices, but it allows two indirect estimates. In Microsoft 365 Commercial cloud, revenue grew 15% against a 6% increase in seats. Implied revenue per seat therefore grows by about 8.5% (1.15 / 1.06 − 1), supported according to the document by "growth in revenue per user".
In Microsoft 365 Consumer cloud, revenue grows 11% with subscribers up 8%. Subscribers number 89.0 million. Implied revenue per subscriber rises by about 2.8% (1.11 / 1.08 − 1), and the document attributes this in part to the "price increase announced in January 2025". In search advertising, revenue excluding traffic acquisition costs grows 20%, driven by "higher search volume and higher revenue per search". The starting percentages are rounded by the company, so the estimates carry a margin of error of a few tenths.
The opposite signal comes from infrastructure cloud. The gross margin of Intelligent Cloud falls to 62.2% from 66.1% in FY2024. Calculation: (106,265 − 40,171) / 106,265 = 62.2%; (87,464 − 29,611) / 87,464 = 66.1%. The Microsoft Cloud gross margin "decreased to 69%". The document explains this with "the impact of scaling our AI infrastructure", not with price cuts, but provides no data to separate the two effects.
Activision Blizzard has been consolidated since 13 October 2023, so FY2025 includes about three and a half more months of Activision than FY2024. Note 7 reports FY2024 pro forma revenue of 247,442 mn, as if the acquisition had occurred on 1 July 2022. Against this base, FY2025 growth is 13.9%, versus the reported 14.9%. Calculation: 281,724 / 247,442 − 1 = 13.9%. About one point of growth therefore depends on scope; the pro forma figure includes purchase accounting adjustments and is not an actual accounting figure.
In FY2025 acquisitions generated no new goodwill: the "Acquisitions" column in Note 8 is zero. Spending on acquisitions and purchases of intangibles was 5,978 mn, against 69,132 mn in FY2024. Xbox content and services grows 16%, "driven by the impact of the Activision Blizzard acquisition and Xbox Game Pass", without a breakdown between the two components. According to the document, the currency impact on FY2025 revenue was not material.
| Item | FY2025 | FY2024 | FY2023 | YoY 25/24 | YoY 24/23 |
|---|---|---|---|---|---|
| Revenue | 281,724 | 245,122 | 211,915 | +14.9% | +15.7% |
| Cost of revenue | 87,831 | 74,114 | 65,863 | +18.5% | +12.5% |
| Research and development | 32,488 | 29,510 | 27,195 | +10.1% | +8.5% |
| Sales and marketing | 25,654 | 24,456 | 22,759 | +4.9% | +7.5% |
| General and administrative | 7,223 | 7,609 | 7,575 | −5.1% | +0.4% |
| Total operating expenses | 65,365 | 61,575 | 57,529 | +6.2% | +7.0% |
| Depreciation, amortization and other (CF) | 34,153 | 22,287 | 13,861 | +53.2% | +60.8% |
Operating expenses grow at less than half the pace of revenue: +6.2% against +14.9%. The operating margin thus rises to 45.6%. In FY2024 and FY2023 it was 44.6% and 41.8% respectively. The leverage sits below gross margin, not above it: cost of revenue grows 18.5%, faster than revenue. Gross margin therefore falls to 68.8% from 69.8%. The cash flow line "depreciation, amortization and other" grows 53.2%, and the document warns that investments in cloud and AI "will continue to increase our operating costs and may decrease our operating margins". The scalability of selling and administrative expenses is offsetting the rising capital intensity of the infrastructure.
| Item (US$ mn) | FY2025 | FY2024 | FY2023 | YoY 25/24 | YoY 24/23 |
|---|---|---|---|---|---|
| Revenue | 281,724 | 245,122 | 211,915 | +14.9% | +15.7% |
| Cost of revenue | 87,831 | 74,114 | 65,863 | +18.5% | +12.5% |
| Gross profit | 193,893 | 171,008 | 146,052 | +13.4% | +17.1% |
| Gross margin | 68.8% | 69.8% | 68.9% | −0.9 pp | +0.8 pp |
| Research and development | 32,488 | 29,510 | 27,195 | +10.1% | +8.5% |
| Sales and marketing | 25,654 | 24,456 | 22,759 | +4.9% | +7.5% |
| General and administrative | 7,223 | 7,609 | 7,575 | −5.1% | +0.4% |
| Operating income | 128,528 | 109,433 | 88,523 | +17.4% | +23.6% |
| Operating margin | 45.6% | 44.6% | 41.8% | +1.0 pp | +2.9 pp |
| Interest and dividends income | 2,647 | 3,157 | 2,994 | −16.2% | +5.4% |
| Interest expense | (2,385) | (2,935) | (1,968) | −18.7% | +49.1% |
| Other, net | (4,725) | (1,319) | (223) | n.m. | n.m. |
| Total other income (expense) | (4,901) | (1,646) | 788 | n.m. | n.m. |
| Income before income taxes | 123,627 | 107,787 | 89,311 | +14.7% | +20.7% |
| Income taxes | 21,795 | 19,651 | 16,950 | +10.9% | +15.9% |
| Effective tax rate | 17.6% | 18.2% | 19.0% | −0.6 pp | −0.7 pp |
| Net income | 101,832 | 88,136 | 72,361 | +15.5% | +21.8% |
| Net margin | 36.1% | 36.0% | 34.1% | +0.2 pp | +1.8 pp |
| Basic EPS (US$) | 13.70 | 11.86 | 9.72 | +15.5% | +22.0% |
| Diluted EPS (US$) | 13.64 | 11.80 | 9.68 | +15.6% | +21.9% |
| Weighted average diluted shares (mn) | 7,465 | 7,469 | 7,472 | −0.1% | 0.0% |
The "Other, net" line moves from −1,319 to −4,725 mn. The document attributes it to "net recognized losses on equity method investments, including OpenAI", without isolating the OpenAI share. These losses equal 3.8% of income before taxes (4,725 / 123,627).
| Item (US$ mn) | 30/06/2025 | 30/06/2024 |
|---|---|---|
| Cash and cash equivalents | 30,242 | 18,315 |
| Short-term investments | 64,323 | 57,228 |
| Total liquidity (A) | 94,565 | 75,543 |
| Commercial paper | 0 | 6,693 |
| Current portion of long-term debt | 2,999 | 2,249 |
| Long-term debt | 40,152 | 42,688 |
| Financial debt (B) | 43,151 | 51,630 |
| Operating lease liabilities | 22,861 | 19,077 |
| Finance lease liabilities | 46,172 | 27,145 |
| Gross debt including leases (C) | 112,184 | 97,852 |
| Net financial position excluding leases (B − A) | −51,414 (net cash) | −23,913 (net cash) |
| Net financial position including leases (C − A) | 17,619 | 22,309 |
| Stockholders' equity | 343,479 | 268,477 |
| Non-controlling interests | not available | not available |
| Goodwill | 119,509 | 119,220 |
| Intangible assets, net | 22,604 | 27,597 |
| Property and equipment, net | 204,966 | 135,591 |
Net of bonded debt alone, Microsoft has net cash of 51,414 mn. Including leases, the position becomes net debt of 17,619 mn. Finance leases grow 70.1% (46,172 / 27,145 − 1 = 70.1%). They now exceed long-term debt, which stands at 40,152 mn. Outside debt sit long-term income tax liabilities of 25,986 mn, which according to Note 11 consist mainly of uncertain tax positions. The final transition tax installment (4.4 billion) is instead classified as short-term.
Net property and equipment grows 51.2% in one year. Goodwill and intangibles total 142,113 mn (119,509 + 22,604). They equal 41.4% of stockholders' equity (142,113 / 343,479).
| Item (US$ mn) | FY2025 | FY2024 | FY2023 |
|---|---|---|---|
| Cash from operations | 136,162 | 118,548 | 87,582 |
| Capex | (64,551) | (44,477) | (28,107) |
| Free cash flow | 71,611 | 74,071 | 59,475 |
| SBC | 11,974 | 10,734 | 9,611 |
| FCF net of SBC | 59,637 | 63,337 | 49,864 |
| Cash taxes paid (bn) | 28.7 | 23.4 | 23.1 |
| Buybacks (cash) | 18,420 | 17,254 | 22,245 |
| Dividends paid | 24,082 | 21,771 | 19,800 |
FCF falls 3.3% while cash from operations grows 14.9%. Calculation: 71,611 / 74,071 − 1 = −3.3%. The difference is capex, up 45.1%. Capex absorbs 47.4% of cash from operations (64,551 / 136,162 = 47.4%). In FY2024 and FY2023 the share was 37.5% and 32.1%.
Cash flow capex does not include new finance leases, which enter the balance sheet without an immediate cash outflow. In FY2025 right-of-use assets obtained through finance leases amount to 20,511 mn. Two more conservative measures of FCF:
SBC amounts to 11,974 mn. Relative to revenue it weighs 4.3% (11,974 / 281,724 = 4.3%). Relative to FCF it weighs 16.7% (11,974 / 71,611 = 16.7%). Shares outstanding stayed at 7,434 million between the start and end of the year (Note 15). During the year 31 million were issued and the same number repurchased. The buyback program served to neutralize dilution, not to reduce the share count. The 18,420 mn of cash buybacks include 5.4 billion of shares withheld for tax withholding on stock plans. Unrecognized SBC costs amount to 21.6 billion, to be expensed over about three years.
Owner earnings, without double-counting SBC (GAAP net income is already net of SBC):
Owner earnings = net income + depreciation, amortization and other − capex = 101,832 + 34,153 − 64,551 = 71,434 mn.
The document does not distinguish maintenance capex from growth capex: all capex is deducted, which penalizes the measure during a capacity expansion phase. The "Depreciation, amortization, and other" line includes components that are not detailed. The notes isolate three: depreciation of property and equipment of 22.0 billion and amortization of intangibles of 6.0 billion (Notes 6 and 9). Note 13 adds 3,408 mn of finance lease amortization.
Cash taxes paid (28.7 billion) exceed the income statement tax charge (21,795 mn) by 31.7%. The document shows deferred tax assets for capitalized R&D of 16,891 mn, up from 11,442.
| Metric | FY2025 | FY2024 | FY2023 |
|---|---|---|---|
| Gross margin | 68.8% | 69.8% | 68.9% |
| Operating margin | 45.6% | 44.6% | 41.8% |
| Net margin | 36.1% | 36.0% | 34.1% |
| EBITDA (operating income + depreciation, amortization and other) | 162,681 | 131,720 | 102,384 |
| FCF | 71,611 | 74,071 | 59,475 |
| FCF / net income | 70.3% | 84.0% | 82.2% |
| Capex / revenue | 22.9% | 18.1% | 13.3% |
| SBC / revenue | 4.3% | 4.4% | 4.5% |
| Interest coverage | 53.9x | 37.3x | 45.0x |
| ROIC | 29.3% | 30.8% | not available |
| Gross debt including leases / EBITDA | 0.69x | 0.74x | not available |
Formulas (FY2025, with FY2024 where calculable; period-end balances for both years, because the FY2023 balance sheet is not in the document):
FY2025 interest coverage is flattered by the "higher capitalization of debt interest expense" cited in the MD&A: capitalized interest does not pass through the income statement and the document does not state the amount.
Multiples (price US$ 497.41 on 30 June 2025; 7,433,166,379 shares on 24 July 2025; market capitalization 3,697,331 mn; FY2025 denominators, fiscal year ended on the same date as the price):
Tax dispute with the IRS (potential). For tax years 2004-2013 the IRS "is seeking an additional tax payment of $28.9 billion plus penalties and interest" on transfer pricing. The amount equals 30.6% of year-end liquidity (28.9 / 94.6 billion = 30.6%). Unrecognized tax benefits rise to 24.7 billion, with accrued interest of 8.2 billion. The company considers itself adequately reserved, but the auditor classifies the matter as a Critical Audit Matter and tax years 2014-2017 are still under audit.
Return on AI infrastructure investment (materializing in margins). The document warns that the company may "not grow revenue in line with the infrastructure and development investments". Commitments already signed are significant: construction of 32,149 mn, purchases of 109,953 mn and leases not yet commenced of 92.7 billion. The Microsoft Cloud gross margin has fallen to 69%; that of Intelligent Cloud has moved from 66.1% to 62.2%. Total contractual obligations (397,045 mn) are 4.2 times liquidity.
Dependence on OpenAI and losses on investments (materialized). Losses on equity-method investments took "Other, net" to −4,725 mn, against −1,319 mn. Funding commitments to OpenAI are 13 billion. The document also cites OpenAI among the sources of AI risk, because part of the AI offered "may be developed by Microsoft or others, including our strategic partner, OpenAI".
Cybersecurity (materialized). From late November 2023 a "nation-state associated" actor gained access to corporate email accounts and to "some of our source code repositories and internal systems". The document states that the incident "has and may continue to result in harm to our reputation and customer relationships". It does not quantify the costs, and in Item 1C it states that it does not believe cyber risks have had material effects.
Regulation of competition, AI and trade (partly materialized). The document lists the European Digital Markets Act and Digital Services Act, the AI Act, US tariffs and export controls on AI. On privacy, the Irish authority notified LinkedIn in October 2024 of a decision on GDPR violations "assessing a fine", appealed in November 2024. The document does not state the amount of the fine.
Currencies (potential). 48.7% of revenue is generated outside the United States. According to the sensitivity analysis, a 10% decrease in foreign exchange rates would reduce earnings by 11,596 mn, equal to 11.4% of FY2025 net income.
Concentrated suppliers (potential). The document states that "There are few qualified suppliers for certain components", GPUs included, and that competitors draw on the same suppliers. A shortage would limit datacenter capacity at a time when capex is growing 45.1%.
Goodwill and intangibles (materialized in the past, potential today). Goodwill and intangibles total 142,113 mn, of which 51,001 mn is goodwill from Activision Blizzard. Accumulated goodwill impairments already amount to 11.3 billion, and the document refers to the possibility of a future "significant charge". The May 2025 test found no impairment.
Ordinary litigation (potential, limited in size). Accrued legal liabilities are 541 mn, with reasonably possible additional losses of approximately 600 mn. The amount is small relative to operating income, but the company warns of "new and novel legal claims" related to AI, including intellectual property in training data.
The cover page lists a single class of listed common stock (MSFT, NASDAQ), plus two euro-denominated notes. The document does not describe controlling shareholders or differentiated voting rights; principal shareholders are referred to the Proxy Statement. There were 77,014 registered holders on 24 July 2025.
The 10-K is signed by twelve board members: Satya Nadella, who combines the roles of Chairman and CEO, and eleven directors, including Sandra E. Peterson as Lead Independent Director. Combining the two roles concentrates power in one person, with the Lead Independent Director as a counterweight. There are seven executive officers; among them Bradford L. Smith (Vice Chair and President) and Amy E. Hood (CFO since 2013).
Director and executive compensation is not in the document: Item 11 refers to the Proxy Statement. The 10-K attaches an Executive Compensation Recovery Policy (Exhibit 97.1) and states that no officer or director adopted or modified 10b5-1 trading plans in the fourth quarter.
Related parties: in March 2024 Microsoft obtained a non-exclusive license to the intellectual property of Inflection AI, of which director Reid Hoffman is a co-founder and board member. The document specifies that Hoffman "did not participate" in the approval meetings, but does not state the amount of the transaction.
The auditor is Deloitte & Touche LLP, which "served as the Company's auditor since 1983". The opinion on the financial statements and on internal control is unqualified.
Significant policies. Office 365 revenue is treated as a single performance obligation and recognized ratably, because desktop applications and cloud services are "accounted for together". Distinct on-premises licenses are recognized on delivery. Standalone selling prices of components not sold separately are estimated by management. The useful life of computer equipment ranges "two to six years": the document reports no changes in the year, but on 132,836 mn of "computer equipment and software" at cost the choice of useful life has a significant effect on depreciation.
Changes in the year. The FASB standard on segment disclosures was adopted, adding cost of revenue and operating expenses by segment. Prior-year segments were recast, with "no impact" on the consolidated statements. Two standards are upcoming: income tax disclosures from FY2026 and expense disaggregation from FY2028.
Critical Audit Matters. Deloitte identifies two: revenue recognition on certain volume licensing contracts and uncertain tax positions related to transfer pricing.
Choices that move earnings:
GAAP and non-GAAP. The 10-K presents neither a non-GAAP earnings figure nor a list of excluded items. It uses operating metrics calculated on a GAAP basis (Microsoft Cloud revenue, Azure growth, advertising revenue excluding traffic acquisition costs) that do not adjust earnings. There is therefore no reconciliation to examine.
Taxes. The FY2025 effective tax rate is 17.6%, against a federal statutory rate of 21.0%. The main reconciling items:
| Item | FY2025 | FY2024 | FY2023 |
|---|---|---|---|
| Federal statutory rate | 21.0% | 21.0% | 21.0% |
| Foreign earnings taxed at lower rates | −1.5% | −1.4% | −1.8% |
| FDII deduction | −1.0% | −1.1% | −1.3% |
| State income taxes | +1.5% | +1.5% | +1.6% |
| R&D credit | −1.1% | −1.1% | −1.1% |
| Excess tax benefits from SBC | −0.9% | −1.1% | −0.7% |
| Interest, net | +1.0% | +1.1% | +0.8% |
| Other reconciling items, net | −1.4% | −0.7% | +0.5% |
| Effective rate | 17.6% | 18.2% | 19.0% |
The document attributes the gap to the federal rate to earnings from producing and distributing through the regional operations center in Ireland, which generated 81% of foreign income before tax in FY2025. The decrease from FY2024 is instead attributed to "changes in the mix of our earnings and tax expenses between the U.S. and foreign countries". Irish operations remain subject to examination from 2020.
Contracted backlog. Remaining performance obligations total 375 billion, of which 368 are commercial. The company expects to recognize "approximately 40%" over the next twelve months.
Datacenter capacity already contracted. There are leases not yet commenced of 92.7 billion, starting between FY2026 and FY2031, and construction commitments of 32.1 billion. With Azure growing at 34%, bringing this capacity into service is the condition for turning demand into revenue; the flip side is risk no. 2.
US tax reform. The document cites the One Big Beautiful Bill Act, enacted on 4 July 2025, which introduces bonus depreciation for certain assets and the option to expense US research expenditures. Both measures may reduce cash taxes paid, which in FY2025 exceeded the book tax charge by 31.7%. The company "is currently assessing" the law and does not quantify the effect; the 14% GILTI rate from FY2027 has an impact whose direction is not stated.
Microsoft 365 pricing and monetization. The consumer price increase announced in January 2025 and the growth in commercial revenue per user (estimated at about 8.5%) will affect a full year. The document cites Microsoft 365 Copilot and agents among the areas of investment, but provides no adoption figures and does not attribute to them any effect on revenue per user.
Buyback program. 57.3 billion remains on the 60.0 billion program, with no expiration. At the FY2025 pace (13.0 billion) the program covers more than four years, but so far it has only offset share issuance to employees.
The 10-K contains no numerical margin targets, capex targets or business plans: the company provides this kind of guidance outside the 10-K. The comparison is possible only for commitments that appear in the comparative columns or in the notes of this document.
| Item | Stated | Delivered | Variance |
|---|---|---|---|
| Buyback program of 14 September 2021 (60.0 bn) | Program running since November 2021 | "completed in April 2025" (Note 15) | None |
| Buyback program of 16 September 2024 (60.0 bn) | Start after completion of the previous one | Started in April 2025; 57.3 bn remaining | 2.7 bn used (60.0 − 57.3) |
| Dividend declared on 12 June 2024 | 5,574 mn, payable 12 September 2024 | Included in the 24,082 mn paid in FY2025 (5,574 + 6,170 + 6,169 + 6,169) | None |
| Annual dividend per share | US$ 3.00 in FY2024 | US$ 3.32 in FY2025 | +10.7% (3.32 / 3.00 − 1) |
| Current portion of long-term debt at 30 June 2024 | 2,249 mn due within one year | Face value of 2015 issuance: from 9,805 to 7,555 (−2,250); total repayments in CF 3,216 | Cash repayments 967 mn above the current portion; the document does not reconcile the difference |
| Commercial paper at 30 June 2024 | 6,693 mn | Zero at 30 June 2025; net flow in CF −5,746 | Difference of 947 mn not reconciled by the document |
| Pillar Two (from FY2025) | "do not currently estimate a material impact" | Effective tax rate 17.6% against 18.2% | Consistent with the statement |
| Activision Blizzard purchase price allocation | Measurement period open at 30 June 2024 | "completed as of September 30, 2024"; "Acquisitions" column in Note 8 at zero, any adjustments included in "Other" (+152 mn on MPC) without breakdown | Not quantifiable |
| Margin, capex and capacity targets | Not present in the document | — | Comparison not possible |
| 2030 sustainability goals | Announced in 2020 | The document refers to the Environmental Sustainability Report, not attached | Comparison not possible |
On margins, return on capital, balance sheet strength and revenue recurrence, the document's numbers describe a high-quality company. The exception is cash conversion, which declined in FY2025. The problem for a value-oriented investor is the price. On 30 June 2025 the market capitalization of 3,697.33 billion corresponds to 36.3 times earnings and 51.6 times FCF. The FCF yield is 1.94%. Counting SBC as a cost it falls to 1.61% (59,637 / 3,697,331 = 1.61%).
With a cash yield below 2%, the return to shareholders depends almost entirely on future FCF growth. The price assumes that the current investment phase returns to converting into cash: that capex stops growing faster than revenue and that cloud gross margins stabilize. In FY2025 the opposite happened: FCF fell while earnings rose 15.5%.
The thesis holds under two conditions. The first is that infrastructure investments generate revenue at margins close to those of FY2023-FY2024. The second is that paying demand is found for the commitments across construction, purchases and leases not yet commenced: 32,149 + 109,953 + 92,700 = 234,802 mn. It does not hold if Azure growth slows before the capacity comes into service, because in that case depreciation and fixed lease payments will compress margins just as the valuation assumes they are maintained. At the 30 June 2025 price, a margin of safety does not emerge from the document's numbers: it depends on growth forecasts that the 10-K does not provide.
Metrics to monitor in the coming quarters:
Report based on the Microsoft Corporation Form 10-K for the fiscal year ended 30 June 2025, signed on 30 July 2025. Multiples calculated using the closing price of US$ 497.41 on 30 June 2025, provided as data external to the document, and 7,433,166,379 shares on 24 July 2025 (10-K cover page). This report is for analytical purposes and does not constitute investment advice.
The full data table behind this report — every line item with its source in the filing and the arithmetic checks — is published separately: Microsoft FY2025 data table.