Since the rise of technology in recent years, Muslim investors frequently ask the question “is Microsoft stock halal?”. Microsoft is a multinational technology company that attracts a lot of investors due to its household name.
To find out whether Microsoft is Shariah-compliant, we will use the following three criteria:
- The business activity
- Interest-bearing debt to company’s market capitalization
- Interest-bearing securities to company’s market capitalization
Microsoft Business Activities
Microsoft Corporation was founded in 1975 by childhood friends, Bill Gates and Paul Allen. Microsoft’s main line of products includes computer software, personal computers, consumer electronics, and more. Additionally, the company manufactures, designs, and sells a variety of personal devices, such as tablets, personal computers, and phones. The company’s business segments are ‘Productivity and Business Processes’, ‘Intelligent Cloud’, and ‘Personal Computing’. Although Microsoft offers a range of products, nothing beats its most famous software products: Microsoft Windows, Microsoft Office Suite, and Internet Explorer. Currently, Microsoft ranks as one of the top 5 largest companies in the USA and goes amongst Google, Apple, Amazon, and Facebook.
Is Microsoft stock halal?
So, let’s begin to screen based on the above criteria and find out whether Microsoft stock is halal or not.
Firstly, we check the business activity of Microsoft. The company’s impermissible business activities account for only 0.60% of its overall revenue. However, 8.73% of total revenue comes from questionable activities. As a result, we cannot confidently state whether Microsoft stock is halal or not, since non-Islamic business activities exceed 5% of its total revenue.
Secondly, we conduct a financial screening analysis. Certainly, we screen the company’s interest-bearing debt ratio. The interest-bearing debt should not exceed 30% of the company’s market capitalization. In Microsoft’s case, the percentage of interest-bearing debt is 2.92% of its market capitalization. So, we can conclude that it meets the criteria.
| Total Debt | $50.01B |
| 36 Months Average Market Cap | $1.71T |
Finally, we need to screen for interest-bearing securities. Microsoft’s interest-bearing securities account for 6.11% of its market capitalization. The total amount of securities that earn interest should not exceed 30% of its market capitalization.
| Cash & Equivalents | $104.64B |
| 36 Months Average Market Cap | $1.71T |
Although Microsoft Corporation passes two financial screenings, more than 5% of its total revenue comes from questionable business activities. Therefore, the Microsoft stock is one of the questionable stocks from the Shariah perspective, and Muslim investors are advised not to invest in such questionable investments.
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