Microsoft Corporation (MSFT)

Interest coverage

		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
Interest expense	US$ in thousands	2,385,000	2,935,000	1,968,000	2,063,000	2,346,000
Interest coverage		52.84	37.72	46.38	41.58	31.31

June 30, 2025 calculation

Interest coverage = EBIT ÷ Interest expense
= $126,012,000K ÷ $2,385,000K
= 52.84

The interest coverage ratios for Microsoft Corporation over the specified periods demonstrate a generally strong capacity to meet interest obligations from earnings before interest and taxes (EBIT). As of June 30, 2021, the interest coverage ratio stood at 31.31, indicating that Microsoft's EBIT was over 31 times its interest expense, reflecting a highly comfortable position to service debt obligations. This ratio increased significantly the following year to 41.58 as of June 30, 2022, further enhancing the company's capacity to cover interest payments, suggesting improved earnings or a reduction in interest expense relative to EBIT.

The upward trend persisted into June 30, 2023, with the ratio reaching 46.38, reinforcing the perception of a robust financial position. However, for the subsequent year ending June 30, 2024, the ratio declined to 37.72, signaling a slight reduction in the company's ability to generate EBIT relative to interest expenses, though still maintaining a very high coverage level.

Looking ahead to June 30, 2025, the ratio is projected to increase significantly to 52.84, indicative of a strong expected improvement in EBIT sufficiently surpassing interest obligations. Overall, these ratios illustrate that Microsoft has maintained, and in some periods enhanced, a substantial margin of safety in interest coverage, underscoring its strong profitability and financial stability, though the dip in 2024 warrants attention to underlying factors such as changes in EBIT or interest expense.