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Microsoft just reported second quarter earnings. Revenue increased 2% to 52.7 billion year over year while net income decreased 12% to 16.4 billion.

Based on the latest share price Microsoft has a market cap of 1.8 trillion. With 100 billion of cash and 44 billion of long term debt the enterprise value is roughly 1.74 trillion.

Revenue over the last 12 months is 204 billion with net income of 67 billion and 9 dollars earnings per share.

That gives the company an expensive valuation of 8.5 times revenue or 27 times earnings.

Historical revenue growth, meanwhile, is clocking 11% over the past ten years and EPS growth is roughly 18%.

Breaking out the earnings report you can see that the real bright spot is Microsoft cloud. Cloud revenue was up 22% to 27.1 billion meaning cloud run rate revenues are now over $100 billion a year and the most important part of Microsoft's business.

But again, we are seeing deceleration in some areas.

And here’s an interesting chart which shows how slowing growth has been gradually spreading across segments over the last few quarters.

None of this is surprising, of course. Microsoft is exposed to higher operating costs like almost everyone else so it will face the same pressures on growth.

On the plus side, the company has a staggering amount of cash and its invested at least 10 billion in OpenAI, the company behind Chat GPT. This is no doubt a smart move and could help the business gain market share in online search and cloud computing.

But, trading at the multiple of 8 times revenue and 27 times earnings, Microsoft is already pricing in a significant amount of growth.

#stocks #investing #microsoftstock #valueinvesting

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