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Microsoft Q4 2025 · Earnings

Microsoft (MSFT) closed its fourth quarter and full fiscal year ended June 30, 2025, with outstanding financial results, propelled by sustained momentum in cloud and AI services and solid performance across all core business segments. The company’s strong execution on innovation and operational efficiency enabled robust top- and bottom-line growth.

In Q4 2025, Microsoft reported revenue of $76.4 billion, an 18% increase year-over-year, with operating income rising 23% to $34.3 billion. Net income climbed 24% to $27.2 billion, and diluted earnings per share (EPS) also rose 24% to $3.65. For the full fiscal year, revenue reached $281.7 billion, up 15%, while operating income grew 17% to $128.5 billion. Net income totaled $101.8 billion, a 16% increase, and EPS came in at $13.64, also up 16%. Gross margin for the year rose 13% to $193.9 billion.

Cloud remained a powerful growth engine. Microsoft Cloud revenue hit $168.9 billion for the fiscal year, a 23% year-over-year increase, with Q4 revenue alone reaching $46.7 billion, up 27%. This momentum was largely fueled by continued demand for AI-enhanced services and infrastructure.

All three operating segments delivered notable performance:

  • Productivity and Business Processes generated $33.1 billion in Q4 revenue, up 16%, and $120.8 billion for FY25, an increase of 13%, with operating income up 17% to $69.8 billion. Key contributors included Microsoft 365 Commercial (up 16%), Microsoft 365 Consumer (up 21%), Dynamics 365 (up 23%), and LinkedIn, which saw 9% growth. Microsoft 365 Consumer subscribers reached 89 million, up 8% year-over-year.
  • Intelligent Cloud delivered Q4 revenue of $29.9 billion, up 26%, and $106.3 billion for the full year, up 21%, with operating income rising 18% to $44.6 billion. Azure led the way with annual revenue surpassing $75 billion, up 34% year-over-year, and 39% growth in Q4 alone. AI infrastructure investment affected margins—Microsoft Cloud gross margin fell to 69%—but was partly offset by efficiency gains.
  • More Personal Computing posted $13.5 billion in Q4 revenue, up 9%, and $54.6 billion for the year, up 7%, while operating income jumped 18% to $14.2 billion. Growth was driven by Windows OEM and Devices (+3%), Xbox content and services (+13%), and Search and news advertising revenue (+21%, excluding TAC).

Strategically, Microsoft is deepening its AI footprint. Azure’s surge reflects both core cloud growth and escalating AI workload demand. Microsoft 365 Copilot is gaining traction rapidly, with over 230,000 organizations using Copilot Studio, driving higher revenue per user. LinkedIn surpassed 1 billion members, while Xbox saw strong growth, including 45%+ YoY growth in PC Game Pass revenue and record usage in cloud gaming, boosted by the Minecraft movie.

On the security front, Microsoft now supports 1.4 million customers, with 21% using four or more workloads. Meanwhile, total advertising revenue across Microsoft’s platforms surpassed $20 billion in the last 12 months.

CEO Satya Nadella underscored the pivotal role of cloud and AI in transforming global business, noting Azure’s $75 billion milestone. CFO Amy Hood emphasized strong commercial demand, with commercial bookings up 18% and remaining performance obligation (RPO) up 34% to $315 billion. Despite AI scaling pressures on cloud gross margin, overall company operating margins improved thanks to cost efficiency and disciplined capital spending.

Looking ahead, Microsoft expects continued strength in cloud and AI, though near-term capacity constraints may persist. Management anticipates moderation in some segments but projects slightly higher operating margins for FY26. Capital expenditures will continue to rise, albeit at a slower pace, with a larger share going to short-lived, revenue-generating assets.

In Q4 alone, Microsoft returned $9.4 billion to shareholders through dividends and buybacks, highlighting its commitment to shareholder value.

In summary, Microsoft capped off FY25 with exceptional performance across the board, reaffirming its leadership in cloud, AI, productivity, and gaming, while positioning itself strongly for future growth amid the AI transformation.

July 31, 2025
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