Microsoft

Software - Infrastructure • Technology • Redmond, WA, United States • MSFT (NMS)

425 882 8080 One Microsoft Way, Redmond, WA 98052-6399, United States

Quarter: Q3 2025 Reported: July 30, 2025 Sentiment: Positive

Microsoft Corporation develops and supports software, services, devices, and solutions worldwide. The company's Productivity and Business Processes segment offers Microsoft 365 Commercial, Enterprise Mobility + Security, Windows Commercial, Power BI, Exchange, SharePoint, Microsoft Teams, Security and Compliance, and Copilot; Microsoft 365 Commercial products, such as Windows Commercial on-premises and Office licensed services; Microsoft 365 Consumer products and cloud services, such as Microsoft 365 Consumer subscriptions, Office licensed on-premises, and other consumer services; LinkedIn; Dynamics products and cloud services, such as Dynamics 365, cloud-based applications, and on-premises ERP and CRM applications. Its Intelligent Cloud segment provides Server products and cloud services, such as Azure and other cloud services, GitHub, Nuance Healthcare, virtual desktop offerings, and other cloud services; Server products, including SQL and Windows Server, Visual Studio and System Center related Client Access Licenses, and other on-premises offerings; Enterprise and partner services, including Enterprise Support and Nuance professional Services, Industry Solutions, Microsoft Partner Network, and Learning Experience. The company's Personal Computing segment provides Windows and Devices, such as Windows OEM licensing and Devices and Surface and PC accessories; Gaming services and solutions, such as Xbox hardware, content, and services, first- and third-party content Xbox Game Pass, subscriptions, and Cloud Gaming, advertising, and other cloud services; search and news advertising services, such as Bing and Copilot, Microsoft News and Edge, and third-party affiliates. It sells its products through OEMs, distributors, and resellers; and online and retail stores. The company was founded in 1975 and is headquartered in Redmond, Washington.

Analysis Summary

Microsoft concluded its fiscal year 2025 with an exceptionally strong fourth quarter, reporting total revenue of $76.4 billion, an 18% increase from the prior year. This growth was broadly distributed across its segments, with Productivity and Business Processes revenue reaching $33.1 billion (up 16%), Intelligent Cloud revenue at $29.9 billion (up 26%), and More Personal Computing revenue at $13.5 billion (up 9%). Within these segments, key drivers included Microsoft 365 Commercial cloud revenue up 18%, LinkedIn revenue up 9%, Dynamics 365 revenue up 23%, and Azure and other cloud services revenue surging by 39%.

Profitability metrics also saw significant improvements, with operating income increasing 23% to $34.3 billion and net income rising 24% to $27.2 billion. Diluted earnings per share (EPS) mirrored this trend, growing 24% to $3.65. The company's gross margin remained robust, reflecting efficient cost management despite substantial investments. Microsoft's commitment to shareholder returns was evident, as it returned $9.4 billion through dividends and share repurchases during the quarter, underscoring strong free cash flow generation and confidence in its financial outlook.

CEO Satya Nadella highlighted that cloud and AI are the driving forces of business transformation, with Microsoft innovating across the entire tech stack. He proudly announced that Azure's annual revenue surpassed $75 billion, marking a 34% increase, fueled by growth across all workloads. CFO Amy Hood further emphasized the critical role of Microsoft Cloud, which achieved $46.7 billion in revenue, up 27% year-over-year, in closing out a strong fiscal year. These statements reinforce the company's strategic direction and its leadership in the evolving AI and cloud landscape.

While specific forward-looking guidance for the next quarter and full fiscal year will be provided during the upcoming earnings conference call and webcast, the current results position Microsoft strongly. The consistent double-digit growth across its core cloud and AI offerings, coupled with healthy performance in its traditional segments, indicates sustained momentum. The company's strategic investments in AI are clearly paying off, enhancing its competitive advantage and market leadership in critical technology sectors.

Key Highlights

• Total revenue of $76.4 billion, up 18% year-over-year for Q4 FY25.
• Diluted earnings per share (EPS) of $3.65, an increase of 24% year-over-year.
• Microsoft Cloud revenue reached $46.7 billion, growing 27% year-over-year.
• Azure and other cloud services revenue surged by 39%.
• Azure's annual revenue surpassed $75 billion, up 34% for fiscal year 2025.
• Operating income increased 23% to $34.3 billion.
• Returned $9.4 billion to shareholders through dividends and share repurchases in the quarter.

Financial Metrics

eps

3.65

YoY: 24%

revenue

76.4 billion

YoY: 18%

guidance

net income

27.2 billion

YoY: 24%

Stock Performance (90 Days)

Data through Dec 30, 2025

Positive Signals

• Strong double-digit growth across all key financial metrics (revenue, operating income, net income, EPS).
• Exceptional performance and scale of Microsoft Cloud and Azure, indicating robust demand for AI-driven services.
• Consistent shareholder returns through significant dividends and share repurchases.
• Positive management commentary emphasizing cloud and AI as core drivers of business transformation.

Risks & Concerns

— Intense competition in all of Microsoft's markets.
— Execution and competitive risks associated with the focus on cloud-based and AI services.
— Potential for cyberattacks and security vulnerabilities leading to reduced revenue or reputational harm.
— Issues regarding the use of AI in offerings that may result in reputational or competitive harm, or liability.
— Adverse economic or market conditions that could harm business performance.