Microsoft

Microsoft’s financial position is exceptionally strong. The company maintains a fortress balance sheet, with ample cash and very manageable debt levels.

As of the most recent fiscal year, Microsoft held about $76 billion in cash and short-term investments, even after funding a $69 billion acquisition, and it remained in a net cash or near-net-cash position.

Its operational cash generation is enormous – over $118 billion cash from operations in FY2024 – giving Microsoft the ability to self-fund expansions, dividends, buybacks, and acquisitions without straining its finances.

Total debt is relatively low (around $49 billion including short-term debt), and the company’s EBITDA and free cash flow can cover interest obligations dozens of times over. Microsoft has the highest possible credit rating (AAA), a distinction shared by only a couple of companies worldwide, reflecting its virtually zero risk of default.

In practice, this means Microsoft could raise capital cheaply if ever needed, but it often doesn’t have to – for example, it can pay down all its debt with only a fraction of annual cash flow. Such financial strength allows Microsoft to weather economic storms or unexpected setbacks comfortably.

During the 2020 pandemic and other downturns, Microsoft not only remained solvent – it thrived, thanks to its essential services and cash cushion. We insist on owning companies that would survive worst-case scenarios, and Microsoft easily meets that standard. There is no meaningful bankruptcy or liquidity risk here.

In fact, the company’s challenge is often how best to deploy its excess cash. Overall, Microsoft’s balance sheet provides maximum strategic flexibility (to invest aggressively in new opportunities or acquisitions) while ensuring great resilience under any conditions.