Microsoft Corporation (NASDAQ: MSFT) closed at $409.43 on May 15, 2026, implying a market capitalization near $3.7T and a trailing P/E of 36.3x against FY2025 diluted EPS of $13.64. The company reported fiscal year 2025 revenue of $281.7B (up 14.9% from $245.1B), net income of $101.8B, and a 36.1% net margin per its July 30, 2025 10-K filing. The valuation lens for MSFT centers on whether Azure-led cloud growth and the AI capex cycle, which pushed capital expenditures to roughly 22.9% of revenue, can sustain the 29.6% return on equity that justifies the current 10.8x price-to-book multiple.

Company Snapshot

Microsoft operates three reporting segments per its FY2025 10-K: Productivity and Business Processes (Office 365 Commercial, LinkedIn, Dynamics 365), Intelligent Cloud (Azure, server products, GitHub, Nuance), and More Personal Computing (Windows OEM, Surface, Gaming including Activision Blizzard, and Search/Bing advertising). The company is headquartered in Redmond, Washington, employs 228,000 full-time workers, and has been led by CEO Satya Nadella since 2014. Microsoft trades within the Software-Infrastructure industry classification, carries a beta of 1.09, and has traded in a 52-week range of $356.28 to $555.45.

Geographic exposure remains weighted toward the United States, which historically accounts for roughly half of revenue per company disclosures, with the remainder distributed across EMEA, Asia-Pacific, and Latin America. The revenue mix has tilted progressively toward Intelligent Cloud, which the company has identified as its primary growth vector since the Azure platform’s commercialization.

Recent Financial Performance

For the fiscal year ended June 30, 2025, Microsoft reported revenue of $281.72B, a 14.9% increase from $245.12B in FY2024 and a 32.9% cumulative increase from $211.92B in FY2023. Gross profit reached $193.89B at a 68.8% gross margin, contracted modestly from 69.8% in FY2024 as cloud infrastructure costs scaled with Azure capacity additions.

Operating income expanded to $128.53B (45.6% operating margin) from $109.43B (44.6%) the prior year. EBITDA grew to $160.17B from $133.01B, a 20.4% increase, with the EBITDA margin lifting to 56.9% from 54.3%. Net income reached $101.83B, up 15.5% year-over-year, producing diluted EPS of $13.64 versus $11.80 in FY2024 and $9.68 in FY2023, a two-year compound EPS growth rate of approximately 18.7%.

Cash flow metrics warrant attention. Operating cash flow per share rose to $18.32, but capital expenditures per share climbed to $8.68 from $5.99, a 45.1% increase that compressed free cash flow per share to $9.63 from $9.97. Capex-to-revenue moved to 22.9% from 18.1%, and the free cash flow conversion ratio (FCF/operating cash flow) fell to 52.6% from 62.5%. This reflects the AI infrastructure buildout the company telegraphed in its FY2025 earnings call, with Bloomberg reporting Microsoft’s data center commitments crossed $80B for the fiscal year.

Return on equity stood at 29.6%, down from 32.8% in FY2024 as the equity base grew faster than earnings. Return on invested capital was 21.6% versus 22.3%. The effective tax rate was 17.6%, and interest coverage remained at 53.9x, indicating limited solvency stress despite the spending cycle.