Over the five fiscal years from 2021 to 2025, Microsoft demonstrated consistently strong revenue and profit growth, with accelerating momentum in the most recent two years. Annual revenue rose from $168.1 billion in 2021 to $281.7 billion in 2025, representing a compound annual growth rate (CAGR) of approximately 13.8%. Revenue growth dipped to 6.9% in 2023 but rebounded sharply to 15.7% in 2024 and 14.9% in 2025, reflecting robust demand for cloud and artificial intelligence services. Gross profit margin remained remarkably stable, averaging close to 69% over the period, indicating strong pricing power and effective cost control. Operating income (EBIT) grew even faster than revenue, from $69.9 billion in 2021 to $128.5 billion in 2025, a CAGR of 16.4%, as selling, general and administrative expenses increased at a slower pace (6.2% in 2025) than sales. Net income expanded from $61.3 billion to $101.8 billion over the same span, with net margin improving from 36.4% to 36.1% (roughly stable despite higher depreciation and amortization). A notable feature of the period was the sharp rise in depreciation and amortization, which jumped from $10.9 billion in 2021 to $34.2 billion in 2025, driven by heavy investment in data centers and cloud infrastructure. Diluted earnings per share grew from $8.05 to $13.64, a 14.1% CAGR, benefiting from share buybacks (diluted shares outstanding fell from 7.61 billion to 7.47 billion). The effective tax rate remained moderate, with deferred domestic taxes providing a consistent benefit. Overall, the five‑year trend shows a resilient, high‑margin business with operating leverage and a successful shift toward higher‑value cloud and AI offerings.
Turning to the latest five quarterly income statements (from March 2025 through March 2026), Microsoft continued to post sequential revenue gains, albeit with some quarterly volatility in profitability. Revenue increased steadily from $70.1 billion in the quarter ended March 2025 to $82.9 billion in March 2026, a cumulative rise of 18.3% over four quarters. The strongest sequential growth occurred in the December 2025 quarter, when revenue rose 4.6% to $81.3 billion, likely driven by seasonal enterprise spending. Gross margins remained healthy, ranging between 67.6% and 69.0% across the five quarters. EBITDA margins also stayed robust, near 57‑59% of revenue, with a peak of $51.0 billion in the September 2025 quarter. However, net income showed a more erratic pattern. After climbing from $25.8 billion in March 2025 to $27.2 billion in June 2025, $27.7 billion in September 2025, and a strong $38.5 billion in December 2025, net income fell sharply to $31.8 billion in March 2026 – a 17.4% sequential decline. This drop occurred despite a 2.0% revenue increase in the same quarter, suggesting margin pressure. Possible contributors include a sequential rise in SG&A expenses (from $15.7 billion to $17.7 billion), a higher tax provision (from $5.4 billion to $7.6 billion), and perhaps non‑operating items (interest income and expense moved only modestly). Diluted EPS followed the same trajectory, peaking at $5.16 in December 2025 and then retreating to $4.27 in March 2026. While the December quarter’s strength could reflect year‑end booking patterns, the March 2026 decline is notable and warrants monitoring.
In summary, Microsoft’s long‑term financial health remains excellent, with double‑digit annual growth and high margins. Nevertheless, the most recent quarterly results introduce a note of caution: profitability appears more sensitive to operating expenses and taxes, and investors will be watching to see if the March 2026 dip is a seasonal anomaly or the start of a new margin trend.
