• Total Revenue: $281 billion, up 15% year over year.
• Operating Income: Over $128 billion, up 17% year over year.
• Q4 Revenue: $76.4 billion, up 18%.
• Q4 Earnings Per Share (EPS): $3.65, an increase of 24%.
• Microsoft Cloud Revenue: $46.7 billion, up 27%.
• Azure Revenue: $75 billion annually, up 34%.
• Commercial Bookings: Over $100 billion, increasing 37%.
• Commercial Remaining Performance Obligation: $368 billion, up 37%.
• Productivity and Business Processes Revenue: $33.1 billion, up 16%.
• Intelligent Cloud Revenue: $29.9 billion, up 26%.
• More Personal Computing Revenue: $13.5 billion, up 9%.
• Free Cash Flow: $25.6 billion.
• Cash Returned to Shareholders: $9.4 billion this quarter, over $37 billion for the fiscal year.
• Warning! GuruFocus has detected 7 Warning Sign with MSFT.

Release Date: July 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

• Microsoft Cloud surpassed $168 billion in annual revenue, up 23%, showcasing strong growth in cloud services.
• Azure achieved $75 billion in annual revenue, up 34%, driven by growth across all workloads and leading the AI infrastructure wave.
• Microsoft 365 Copilot adoption is accelerating, with significant seat additions and strong usage intensity.
• LinkedIn continues to grow with 1.2 billion members and four consecutive years of double-digit member growth.
• Gaming revenue increased by 10%, with Xbox content and services revenue up 13%, driven by successful game launches and Xbox Game Pass growth.
• Microsoft Cloud gross margin percentage decreased by 2 points year over year due to scaling AI infrastructure.
• On-premises server business revenue decreased by 2%, reflecting a shift to cloud offerings.
• Talent Solutions on LinkedIn continues to be impacted by weakness in the hiring market.
• Despite strong demand, Azure remains capacity-constrained, indicating potential challenges in meeting customer needs.
• Operating expenses increased by 6%, reflecting ongoing investments in AI and cloud infrastructure.

Q: How does Microsoft manage the risk versus reward with emerging AI startups that could become competitors? A: Satya Nadella, CEO, explained that this situation is not new and likened it to past experiences with companies like Netflix and Amazon. He emphasized that having major AI workloads on Azure allows Microsoft to learn and optimize the platform faster. The focus is on shaping the platform with these head apps and ensuring broad diffusion across various applications.

Q: What is the best way for software companies to monetize AI for SaaS, and how should we think about the trajectory of SaaS AI margins? A: Satya Nadella, CEO, noted that the transition to AI is similar to the server-to-cloud transition, where usage expands significantly. He highlighted that SaaS apps are integrating agentic and chat interfaces, leading to increased usage. Amy Hood, CFO, added that monetization models will blend per-user logic with consumption models, adapting as AI capabilities grow.

Q: What are the catalysts driving the acceleration in on-prem to Azure migration, and how durable is this trend? A: Satya Nadella, CEO, identified three main drivers: migrations of existing workloads like SAP, scaling of cloud-native applications, and new AI workloads. He emphasized that these factors are building on each other and contributing to Azure’s growth.

Q: Was there anything surprising about the quarter’s performance? A: Satya Nadella, CEO, mentioned that the rapid development of sophisticated applications on the platform was notable. He highlighted the maturity of the stack and the speed at which robust applications are being built, which is faster than previous technological shifts.

Q: How does Microsoft plan to manage CapEx in relation to Azure growth, especially with the increasing demand for AI infrastructure? A: Amy Hood, CFO, explained that CapEx is aligned with the $368 billion contracted backlog and the demand curve. She emphasized the focus on building capacity to meet demand and the importance of software optimization in maximizing hardware efficiency. Satya Nadella, CEO, added that software plays a crucial role in enhancing hardware performance, contributing to long-term growth.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.