Microsoft Corp. (NASDAQ:MSFT)

Current Taxes

The amount allocated for current taxes exhibits a general upward trend over the analyzed periods. Starting at 10,911 million US dollars in mid-2019, it declined to 8,744 million US dollars in mid-2020, potentially reflecting impacts from that fiscal year on taxable income or tax strategy adjustments.

From mid-2020 onwards, current taxes rose consistently, reaching 24,389 million US dollars by mid-2024. This increase reflects growing taxable income or changes in business operations that raise tax obligations.

Deferred Taxes

The deferred tax amounts show considerable volatility. In mid-2019, deferred taxes were reported as a negative 6,463 million US dollars, indicating a deferred tax benefit or asset.

In mid-2020, deferred taxes shifted to a small positive figure of 11 million US dollars, marking a reversal of the previous period's deferred tax position. The following year saw a slight negative value of 150 million US dollars, remaining close to neutral.

From mid-2021 to mid-2024, deferred taxes again became more substantially negative, with values ranging from -5,702 to -4,738 million US dollars. This suggests recognition of deferred tax assets or reductions in deferred tax liabilities, although the amounts have lessened slightly in the latest period from prior highs.

Provision for Income Taxes

The provision for income taxes shows a general increase over the review period, consistent with current tax trends.

Commencing at 4,448 million US dollars in mid-2019, the provision almost doubled to 8,755 million US dollars by mid-2020, likely reflecting accounting adjustments or increased tax expense recognition.

Between mid-2020 and mid-2024, the provision rose steadily, reaching 19,651 million US dollars. The growth indicates increasing overall tax expense, likely impacted by both rising current tax charges and changes in deferred tax positions.

The analysis of the tax-related financial metrics over the examined years shows several noteworthy trends. The U.S. federal statutory tax rate remained constant at 21% throughout the period, providing a stable benchmark for comparison.

Foreign Earnings Taxed at Lower Rates

This item exhibited a decreasing magnitude of negative impact from -4.1% in 2019 to -1.4% in 2024. The gradual reduction in this benefit suggests diminished tax advantages from foreign earnings over time.

Impact of Intangible Property Transfers

This factor shows sporadic data points with negative impacts noted in 2019 (-5.9%) and 2022 (-3.9%), while data is missing for several years. The negative percentages indicate periodic tax benefits related to intangible property transfers, though without consistent yearly data, no steady trend can be confirmed.

Foreign-derived Intangible Income Deduction

The deduction remained relatively stable, fluctuating narrowly between -1.1% and -1.4%, signaling a consistent, modest tax benefit attributable to foreign-derived intangible income.

State Income Taxes, Net of Federal Benefit

A gradual increase from 0.7% in 2019 to a peak of 1.6% in 2023, followed by a slight decrease to 1.5% in 2024, indicates a modest rising impact of state income taxes net of federal benefits on the overall tax rate.

Research and Development Credit

This credit maintained a stable negative impact on the tax rate around -1.1%, with minor fluctuations, suggesting consistent utilization of R&D tax credits.

Excess Tax Benefits Relating to Stock-Based Compensation

There is a clear diminishing trend in the magnitude of tax benefits from stock-based compensation, moving from -2.4% in 2021 towards a notably smaller -0.7% in 2023, before slightly increasing to -1.1% in 2024. This indicates reduced tax advantages from this source over recent years.

Interest, Net

Net interest impact remained low but showed a slight fluctuating upward pattern from 1% in 2019 to 1.1% in 2024, possibly reflecting changes in interest expenses or income affecting the tax provision.

Other Reconciling Items, Net

This category experienced considerable volatility, starting with positive impacts in 2019 and 2020 (1.8% and 1.3%), then shifting to negative in 2021 and 2022 (-1.8% and -0.7%), rising again slightly positive in 2023 (0.5%), before falling to -0.7% in 2024. This variability points toward fluctuating miscellaneous tax adjustments that impact the effective tax rate.

Effective Tax Rate, Before and After the Tax Cuts and Jobs Act (TCJA)

The effective tax rate before TCJA enactment increased from 9.8% in 2019 to 19% in 2023, with a slight decrease to 18.2% in 2024. The positive impact of TCJA is only recorded in 2019 at 0.4%, with no further impact indicated. Overall, the effective tax rate shows a rising trend after 2019, suggesting an increasing overall tax burden relative to taxable income.

The financial trends reveal several areas of growth and fluctuation across the reporting periods. Notably, stock-based compensation expense consistently increased from 406 million USD in 2019 to 765 million USD in 2024, indicating a rising cost related to employee equity incentives.

Accruals, reserves, and other expenses also showed a general upward trajectory, starting at 2,287 million USD in 2019 and reaching 4,381 million USD by 2024, with a slight dip in 2022 before continuing to rise. This suggests growing provisions or anticipated liabilities over the years.

The figures for loss and credit carryforwards oscillated, dropping sharply from 3,518 million USD in 2019 to 865 million USD in 2020, then gradually climbing to 1,741 million USD in 2024. This pattern may reflect the utilization and replenishment of tax attributes.

Amortization expenses were relatively stable around 6,300-6,400 million USD through 2020-2021 but surged dramatically to 10,183 million USD in 2022, before somewhat declining to 4,159 million USD in 2024. This volatility could be related to changes in intangible asset valuations or impairments.

Leasing liabilities demonstrated a steady increase from 1,594 million USD in 2019 to 6,504 million USD in 2024, reflecting expanded lease obligations. Correspondingly, leasing assets showed increasing negative values reaching -6,503 million USD in 2024, balancing the liabilities on the balance sheet.

Unearned revenue expanded significantly, rising from 475 million USD in 2019 to 3,717 million USD in 2024, signifying growth in prepaid customer income or deferred revenue streams.

Capitalized research and development began appearing in 2022, with a marked increase from 473 million USD to 11,442 million USD by 2024. This suggests a strategic shift towards internal development capitalization, potentially enhancing future asset values.

Deferred income tax assets increased steadily from 15,693 million USD in 2019 to 33,144 million USD in 2024, indicating accumulating temporary differences and unused tax benefits. The associated valuation allowance fluctuated but remained relatively stable around -1,000 million USD in the recent periods, with net deferred income tax assets rising substantially from 12,479 million USD in 2019 to 32,099 million USD in 2024.

Deferred income tax liabilities also increased overall, reaching -12,447 million USD in 2024 from -5,176 million USD in 2019, partially offsetting the deferred tax assets and contributing to a net deferred tax asset position that improved significantly to 19,652 million USD in 2024.

Additional items such as depreciation only appeared from 2021 onwards and showed a notable upward trend from -1,010 million USD to -3,940 million USD by 2024, reflecting increasing amortization of tangible fixed assets or lease-related assets.

The deferred tax on foreign earnings exhibited a decreasing negative trend from -2,607 million USD in 2019 to -1,837 million USD in 2024, which could suggest a reduction in foreign tax liabilities or changes in international profit allocation.

Overall, the data indicates growth in expenses related to stock-based compensation, accruals, and leasing obligations, alongside significant capitalized investments in research and development. Deferred tax assets and liabilities movements imply increasing complexity in tax positions but with a generally stronger net deferred tax asset balance, supporting future tax benefit realization. The changes in amortization and depreciation hint at evolving asset bases and possible revaluations or impairments over time.

The financial data reveals notable trends in the deferred income tax components over the five-year period ending June 30, 2024.

Long-term Deferred Income Tax Assets

There is a marked upward trajectory in long-term deferred income tax assets, increasing from $7,536 million in 2019 to $22,270 million in 2024. This reflects nearly a threefold increase over the five-year span. The growth is especially pronounced from 2021 to 2024, where these assets rise sharply from $7,181 million to $22,270 million, indicating a significant accumulation of deductible temporary differences or carryforwards.

Long-term Deferred Income Tax Liabilities

In contrast, the deferred tax liabilities display a relatively stable pattern through 2019 to 2022, fluctuating modestly between $198 million and $233 million. However, starting in 2023, there is a substantial rise to $433 million, followed by a sharp increase to $2,618 million in 2024. This sharp increase in liabilities suggests the recognition of additional taxable temporary differences or reversal expectations, impacting future tax obligations significantly.

Overall, the data points to an expanding deferred tax asset base accompanied by a recent upward shift in deferred tax liabilities. These dynamics might influence future tax payments and warrant further examination of the underlying causes, such as changes in tax legislation, asset valuations, or timing differences in income recognition.

The reviewed financial data reveals a consistent upward trend in both total assets and total liabilities from June 30, 2019, through June 30, 2024. Reported total assets increased steadily, rising from 286,556 million US dollars in 2019 to 512,163 million US dollars in 2024. Adjusted total assets, which factor in income tax adjustments, show a similar growth trajectory, moving from 279,020 million to 489,893 million US dollars over the same period. This signifies substantial asset growth, with adjusted figures consistently slightly lower than reported figures, indicating the impact of deferred income tax adjustments on asset valuations.

Total liabilities also displayed a gradual increase. Reported total liabilities grew from 184,226 million US dollars in 2019 to 243,686 million in 2024. Adjusted total liabilities closely mirror these numbers, with a small but consistent difference due to tax adjustments, increasing from 183,993 million to 241,068 million US dollars. The relatively modest growth rate in liabilities compared to assets suggests strengthening asset base relative to obligations.

Stockholders’ equity illustrates a robust expansion over the five-year span. Reported equity rose from 102,330 million US dollars in 2019 to 268,477 million US dollars in 2024, reflecting substantial retained earnings and value creation. Adjusted equity figures, accounting for tax effects, also increased significantly from 95,027 million to 248,825 million US dollars, consistently showing lower values than reported equity due to tax adjustments. The strong growth in equity supports a solid capitalization and financial stability.

Net income exhibits a positive upward trend, though with some variation between reported and adjusted figures. Reported net income increased from 39,240 million US dollars in 2019 to 88,136 million in 2024, more than doubling over the period. Adjusted net income, however, shows somewhat lower values each year due to deferred tax adjustments but follows a similar increasing pattern, rising from 32,777 million in 2019 to 83,398 million in 2024. Notably, the gap between reported and adjusted net income widens initially but narrows in later years, suggesting changes in deferred tax impact over time.

Overall, the company's financial position strengthens significantly over the period analyzed, with asset growth outpacing liabilities, increasing equity, and improving profitability. The deferred income tax adjustments result in consistent downward adjustments to asset, liability, equity, and income figures, but these adjustments do not alter the general trend of financial improvement. The data reflects robust financial health and sustained operational success.

The financial data indicates several notable trends over the examined periods concerning profitability, asset utilization, leverage, and returns.

Net Profit Margin

The reported net profit margin remained relatively stable, hovering around the low to mid-30% range from 2019 through 2024, with a peak in 2022 at approximately 36.69%. The adjusted net profit margin exhibited a somewhat more variable pattern, starting lower in 2019 at 26.05%, increasing sharply to nearly 37% by 2021, then experiencing a gradual decline before increasing again in 2024 to 34.02%. These trends suggest an overall strong profitability level, with adjustment factors smoothing some fluctuations.

Total Asset Turnover

Both reported and adjusted total asset turnover ratios show an upward trend from 2019 to 2022, indicating improving asset utilization. Reported turnover increased from 0.44 in 2019 to a peak of 0.54 in 2022, then slightly declined to 0.48 by 2024. Adjusted turnover demonstrated a similar pattern but maintained higher values throughout, peaking at 0.56 in 2022 before a moderate decrease. This suggests operational efficiency improvements until 2022, followed by a modest pullback.

Financial Leverage

Financial leverage ratios display a clear downward trend over the period, signaling a reduction in reliance on debt financing. Reported financial leverage decreased steadily from 2.8 in 2019 to 1.91 in 2024. Adjusted leverage followed the same trajectory but remained slightly higher at each point, decreasing from 2.94 to 1.97. This indicates an intentional or market-driven deleveraging strategy, potentially lowering financial risk.

Return on Equity (ROE)

Reported ROE peaked in 2022 at 43.68%, representing strong shareholder returns, but then decreased significantly to 32.83% by 2024. Adjusted ROE mirrored this pattern, peaking slightly higher at 45.27% in 2021 and then declining to 33.52% in 2024. The decline in ROE after 2022 may be linked to reduced leverage and other operational factors despite solid profitability metrics.

Return on Assets (ROA)

ROA, both reported and adjusted, increased notably from 2019 through 2022, reflecting improved asset efficiency and profitability on asset base, reaching around 19.9% reported and 19.1% adjusted. Post-2022, ROA showed a mild decline and stabilization near 17% by 2024, suggesting that asset performance has leveled off but remains robust.

Overall, the data reveals a profile of strong profitability and improving operational efficiency through 2022, followed by some normalization or strategic adjustments in subsequent years. The consistent decrease in financial leverage may have contributed to the moderation in ROE despite maintained profitability levels. Asset utilization improvements peaked in 2022 but slightly retreated afterward. These patterns suggest a transition phase with a focus on balancing growth, profitability, and financial stability.

Reported Net Income

The reported net income exhibited a generally upward trend over the period, increasing from $39,240 million in 2019 to $88,136 million in 2024. Notably, there was a significant rise between 2020 and 2021, followed by continued growth through 2022. A slight decline was observed in 2023, but the figure rebounded strongly in 2024, reaching the highest value in the timeframe.

Adjusted Net Income

Adjusted net income followed a similar pattern with increases from $32,777 million in 2019 to $83,398 million in 2024. The adjusted figures consistently remained below the reported net income in each period. A marked increase occurred between 2020 and 2021, although growth slowed somewhat after 2021, with a minor decline in 2023 before rising sharply again in 2024.

Reported Net Profit Margin

Reported net profit margins demonstrated stability with an overall increase from 31.18% in 2019 to 35.96% in 2024. There was a slight dip in 2020 but margin improved significantly in 2021 and 2022, peaking near 36.69%. A reduction occurred in 2023, followed by a moderate recovery in 2024, suggesting fluctuating operational efficiency or cost management.

Adjusted Net Profit Margin

Adjusted net profit margins showed greater variability compared to the reported margins. Starting at 26.05% in 2019, the margin improved sharply to 36.36% in 2021. However, the margin declined over the next two years to 31.29% in 2023 before increasing to 34.02% in 2024. The divergence between adjusted and reported margins indicates the impact of tax and non-recurring items on profitability assessments.

Total Assets

Both reported and adjusted total assets show a consistent upward trend over the six-year period from June 30, 2019, to June 30, 2024. Reported total assets increased from 286,556 million US dollars to 512,163 million US dollars, while adjusted total assets rose from 279,020 million US dollars to 489,893 million US dollars. This indicates steady asset growth, with adjusted assets consistently slightly lower than reported assets, reflecting the impact of income tax adjustments.

Total Asset Turnover Ratios

The reported total asset turnover ratio demonstrates an initial increasing trend from 0.44 in 2019 to a peak of 0.54 in 2022, followed by a decline to 0.48 in 2024. The adjusted total asset turnover exhibits a similar pattern, increasing from 0.45 in 2019 to a peak of 0.56 in 2022 before decreasing to 0.50 in 2024. This pattern suggests improving efficiency in utilizing assets to generate revenue until 2022, after which the turnover ratios decline, indicating reduced asset utilization efficiency or possible changes in revenue generation relative to asset base.

Comparison Between Reported and Adjusted Figures

The adjusted figures, both in total assets and asset turnover, are slightly different from the reported numbers. Adjusted total assets are consistently lower than reported total assets, reflecting adjustments likely due to deferred income taxes. Similarly, adjusted turnover ratios are marginally higher than reported turnover ratios across most periods, implying that the adjustments slightly enhance the perceived efficiency of asset utilization.

Total Assets

The reported total assets exhibited a consistent upward trend over the six-year period, increasing from $286,556 million in June 2019 to $512,163 million in June 2024. This growth represents a substantial increase, nearly doubling the asset base. Similarly, the adjusted total assets followed the same trajectory with steady growth, rising from $279,020 million to $489,893 million over the same timeframe. The adjusted figures are consistently lower than the reported values, suggesting that adjustments, possibly accounting for deferred tax considerations, reduce the reported asset totals but maintain the growth pattern observed in the reported data.

Stockholders’ Equity

The reported stockholders’ equity also demonstrated significant growth, increasing from $102,330 million in 2019 to $268,477 million in 2024. The adjusted stockholders’ equity parallels this growth but at slightly lower absolute values, moving from $95,027 million to $248,825 million. This consistent rise in both reported and adjusted equity indicates strengthening financial stability and increased shareholder value over the years. The difference between reported and adjusted equity figures suggests that the adjustments, such as deferred tax impacts, systematically lower equity measurements but preserve the upward trend.

Financial Leverage

Financial leverage ratios exhibit a clear declining trend in both reported and adjusted data. The reported financial leverage decreased from 2.8 in June 2019 to 1.91 in June 2024, indicating a reduction in the reliance on debt financing relative to equity. The adjusted financial leverage follows a similar downward pattern, falling from 2.94 to 1.97 over the same periods. The consistently slightly higher adjusted leverage compared to reported leverage suggests that the adjustments recognize additional liabilities or reduced equity, thereby reflecting a marginally higher leverage position. Overall, the decline in financial leverage signals a strengthening balance sheet with improved equity buffers relative to debt.

Net Income Trends

Reported net income exhibited a consistent upward trend from 39,240 million US dollars in 2019 to 88,136 million in 2024, with significant growth particularly between 2020 and 2022. Adjusted net income followed a similar pattern, increasing from 32,777 million in 2019 to 83,398 million in 2024, although the adjusted figures were consistently lower than the reported values, indicating deferred tax adjustments have a material impact on net income recognition.

Stockholders’ Equity Trends

Reported stockholders’ equity showed steady growth from 102,330 million US dollars in 2019 to 268,477 million in 2024, reflecting a strong accumulation of equity over the period. Adjusted stockholders’ equity was slightly lower but closely tracked the reported figures, increasing from 95,027 million in 2019 to 248,825 million in 2024. The adjusted values suggest that deferred taxes affect reported equity but the overall upward trend remains robust.

Return on Equity (ROE) Analysis

Reported ROE demonstrated a high level of profitability initially, starting at 38.35% in 2019 and peaking at 43.68% in 2022 before declining to 32.83% in 2024. Adjusted ROE showed a similar pattern, rising from 34.49% in 2019 to a peak of 45.27% in 2021, then decreasing to 33.52% by 2024. The slight divergence between reported and adjusted ROE indicates that tax adjustments impact the profitability metric, particularly in earlier years, but both metrics reflect a decline in ROE in the most recent years.

Overall Insights

The financial data reveals strong growth in income and equity base over the six-year period, alongside high but slightly decreasing profitability ratios in recent years. The difference between reported and adjusted figures underscores the significance of tax considerations in evaluating financial performance. The decline in ROE in the last two years may warrant further analysis to identify underlying operational or market factors affecting profitability despite substantial growth in net income and equity.

The financial data reveals consistent growth in both reported and adjusted net income over the observed six-year period, indicating sustained profitability improvements. Reported net income increased from $39,240 million in 2019 to $88,136 million in 2024, with a notable jump between 2020 and 2021, where income rose by approximately 38%. Adjusted net income closely follows a similar trend, rising from $32,777 million in 2019 to $83,398 million in 2024, demonstrating a parallel growth trajectory with slightly lower absolute values compared to reported figures.

Total assets, both reported and adjusted, also show a clear upward trend, reflecting expansion in the company's asset base. Reported total assets grew from $286,556 million in 2019 to $512,163 million in 2024, with steady increases each year. Adjusted total assets start lower but maintain a comparable growth pattern, rising from $279,020 million to $489,893 million over the same period.

Return on assets (ROA) percentages present a more nuanced pattern. Reported ROA increased from 13.69% in 2019 to a peak of 19.94% in 2022, before declining to 17.21% in 2024. This suggests that asset efficiency improved significantly until 2022 but then slightly diminished. Adjusted ROA follows a similar trend but starts lower at 11.75%, peaking at 19.08% in 2022 and settling at 17.02% in 2024. The narrowing gap between reported and adjusted ROA over time indicates that adjustments related to deferred taxes have a diminishing effect on returns as the periods progress.

Overall, the data indicates strong growth in profitability and asset base through 2024, accompanied by improvements in asset utilization efficiency up to 2022, with a modest decline thereafter. The alignment between reported and adjusted figures suggests consistent accounting treatments and relatively stable tax effect adjustments across the periods analyzed.