Microsoft — Financial Results
Revenue and Profit Both Grew Solidly Across the Entire Business
| Metric | FY2025 | FY2024 | Change |
|---|---|---|---|
| Revenue | $281.7B | $245.1B | +15% |
| Operating Income | $128.5B | $109.4B | +17% |
| Net Income | $101.8B | $88.1B | +16% |
| Diluted EPS | $13.64 | $11.80 | +16% |
Every segment grew revenue and operating income, and profit grew faster than revenue — a sign that Microsoft is not just getting bigger, but also more efficient in parts of its business. Diluted earnings per share (profit divided across all shares) rose 16%, meaning each share became meaningfully more valuable on an earnings basis.
Azure Is the Star, Growing 34% and Pulling the Whole Cloud Business Higher
Azure, Microsoft's cloud computing platform, grew revenue 34% year-over-year, driving the Intelligent Cloud segment to $106.3B in revenue — up 21%. The catch is that costs in this segment rose even faster (36%), compressing margins, because Microsoft is spending heavily to build out AI infrastructure such as datacenters and GPUs (specialized chips used to run AI workloads). Growth here is real, but it is coming at a cost.
AI Investment Is Squeezing Cloud Margins
Microsoft Cloud gross margin percentage (the share of cloud revenue left after direct costs) slipped to 69%, down from the prior year. The culprit is the enormous spend on scaling AI infrastructure. Management acknowledged this trade-off explicitly — efficiency gains in Azure are helping, but they are not fully offsetting the buildout costs. Investors should watch whether margins stabilize as utilization of new capacity improves.
The Company Has Made Enormous Infrastructure Commitments
| Obligation | Due Within 1 Year | Total |
|---|---|---|
| Construction commitments | $26.9B | $32.1B |
| Purchase commitments (mainly datacenters) | $103.9B | $110.0B |
| Operating and finance leases | $12.8B | $178.7B |
Microsoft has locked in over $109B in purchase commitments (largely datacenter-related contracts it is obligated to pay) plus another $32B in construction. This signals enormous confidence in long-term AI demand — but also means these costs are coming regardless of how demand evolves.
Microsoft 365 Keeps Growing, Now with 89 Million Consumer Subscribers
Microsoft 365 Commercial cloud revenue grew 15%, with paid user count (seats) up 6% — growth came from both more users and higher revenue per user. On the consumer side, subscribers hit 89.0 million, up 8%, with a January 2025 price increase also boosting per-user revenue. This recurring subscription base provides a predictable, stable revenue foundation.
A $28.9 Billion IRS Tax Dispute Looms in the Background
The IRS is seeking an additional $28.9 billion in taxes plus penalties and interest related to how Microsoft priced transactions between its U.S. and foreign entities (called transfer pricing) for the years 2004–2013. Microsoft disagrees and plans to fight it. No resolution is expected in the next 12 months. While the company says it believes its existing tax reserves are adequate, this is a large number worth watching.
Cash Generation Is Exceptional, With $94.6 Billion on Hand
Cash from operations (cash the business generated from running itself) rose to $136.2B for the year. The company ended the period with $94.6B in cash and short-term investments, up from $75.5B a year earlier. Microsoft returned $13.0B via share repurchases and $24.7B in dividends, with $57.3B still remaining in its current buyback program — suggesting continued shareholder returns ahead.