Microsoft Corporation (MSFT)

Return on total capital

		Jun 30, 2025	Jun 30, 2024	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021
Earnings before interest and tax (EBIT)	US$ in thousands	126,012,000	110,722,000	91,279,000	85,779,000	73,448,000
Long-term debt	US$ in thousands	—	—	—	—	—
Total stockholders’ equity	US$ in thousands	343,479,000	268,477,000	206,223,000	166,542,000	141,988,000
Return on total capital		36.69%	41.24%	44.26%	51.51%	51.73%

June 30, 2025 calculation

Return on total capital = EBIT ÷ (Long-term debt + Total stockholders’ equity)
= $126,012,000K ÷ ($—K + $343,479,000K)
= 36.69%

The analysis of Microsoft Corporation's return on total capital over the period from June 30, 2021, to June 30, 2025, reveals a declining trend in the company’s efficiency in generating profits from its total capital base. As of June 30, 2021, the return on total capital was notably high at 51.73%, indicating robust profitability relative to the capital employed. This figure experienced a slight decrease to 51.51% by June 30, 2022, suggesting a marginal reduction in capital efficiency, which may be attributable to changes in operational performance or capital structure.

From June 30, 2023, onward, a more pronounced downward trend is observed. The return declined to 44.26% in 2023, followed by further decreases to 41.24% in 2024, and 36.69% projected for 2025. This consistent decrease over consecutive years indicates a reduction in the company's ability to generate profit from its total capital investment, which could be driven by several factors such as increased capital expenditure, competitive pressures, changing market dynamics, or shifts in operational efficiency.

Overall, while Microsoft's return on total capital remains relatively substantial, the downward trajectory over these years signals a potential erosion of capital productivity. Continued monitoring would be necessary to determine whether the company can stabilize or improve its return metric in subsequent periods.