For the past few years, Microsoft wasn't considered to be at the forefront of digital innovation. As the sector's ancestor, the Redmond-based group seemed to live in the indifferent opulence of the rent it has inherited from its control of the world's computers and office automation for several decades. But that's forgetting a little quickly that it is necessary to have a considerable capacity of adaptation to keep at bay a fierce competition. And now Microsoft returned in the limelight in a big way because the company is at the heart of the shift towards artificial intelligence that humanity seems destined to take.

Securing access to a disruptive technology

Microsoft has a market capitalization of just over $2,000 billion and the equivalent of Slovenia's GDP in annual net profit. A real cash-generating machine, with a well-known business model, but one that is seeking to diversify.

Fiscal Period: June 2019 2020 2021 2022 2023 2024 2025 2026
Net sales 1 125,843 143,015 168,088 198,270 211,915 244,997 280,142 322,079
EBITDA 1 54,641 65,755 81,602 97,843 103,555 130,263 147,024 171,438
EBIT 1 42,959 52,959 69,916 83,383 89,694 108,498 122,350 142,256
Operating Margin 34.14% 37.03% 41.59% 42.06% 42.33% 44.29% 43.67% 44.17%
Earnings before Tax (EBT) 1 43,688 53,036 71,102 83,716 89,311 107,083 120,843 141,052
Net income 1 39,240 44,281 61,271 72,738 72,361 87,935 99,023 115,457
Net margin 31.18% 30.96% 36.45% 36.69% 34.15% 35.89% 35.35% 35.85%
EPS 2 5.060 5.760 8.050 9.650 9.680 11.80 13.33 15.62
Free Cash Flow 1 38,260 45,234 56,118 65,149 59,475 69,352 78,715 95,740
FCF margin 30.4% 31.63% 33.39% 32.86% 28.07% 28.31% 28.1% 29.73%
FCF Conversion (EBITDA) 70.02% 68.79% 68.77% 66.59% 57.43% 53.24% 53.54% 55.85%
FCF Conversion (Net income) 97.5% 102.15% 91.59% 89.57% 82.19% 78.87% 79.49% 82.92%
Dividend per Share 2 1.840 2.040 2.240 2.480 2.720 2.938 3.206 3.581
Announcement Date 7/18/19 7/22/20 7/27/21 7/26/22 7/25/23 - - -
1USD in Million2USD
Estimates

The biggest recent investment, if we exclude the Activision Blizzard saga whose outcome is uncertain, was made in OpenAI, the parent company of the now famous ChatGPT chatbot. Microsoft, which had already paid an early ticket of $1 billion, put $10 billion on the table to "ensure that these benefits are widely shared with the world", as the group's communicators sought to express it in a great burst of universalist marketing. In reality, it is mainly a matter of securing privileged access to a breakthrough technology. The company is putting its cash and its enormous computing capacities at the service of OpenAI on the basis of an exclusive partnership, in exchange for which it enjoys the commercial developments generated by AI.

The group still packs a punch

For the time being, the sector is preparing its weapons by giving ordinary people small windows on the sum of possibilities: ChatGPT, Bard, Midjourney, DALL-E and so on allow them to rub shoulders with this new universe... In the background, thousands of engineers are working on the next move. Tens of thousands of developers are looking for solutions. And hundreds of thousands of users are excited or despairing about what they are discovering. Microsoft, for its part, is launching trial runs. Using its Edge / Bing browser / search engine combination, which is coming back to the forefront after living in the shadow of Chrome and Google for a long time. Or by integrating new features to its Office suite. Concrete tests that do not go unnoticed, to the point of having caused a shake-up among the giants of Silicon Valley, which have suddenly become aware of the lead that seems to have accumulated the - almost - fifty-year-old.

The new western

It is too early at this stage to judge the potential financial benefits, but they seem considerable. For investors who are tempted by the adventure of artificial intelligence, Microsoft has three essential advantages. First, it is a company with extremely strong backbone and can invest heavily. Second, it has a head start by being in the right place at the right time, thanks to its flair or luck, or more likely a combination of both. Third, it has the tools and distribution network to ensure effective and rapid deployment of solutions based on this technology.

These assets seem essential to evolve serenely in a world that resembles a new Wild West. The challenges posed by artificial intelligence have been debated for a long time, but they have never been as concrete as they have been since 2023 because the general public has had a taste of it. There are so many grey areas that it would be tedious to list them all. Attempts at regulation and questions of intellectual property will soon arise. Will they have a say in the steamroller? We are talking about artificial intelligence, not Microsoft. However.