Microsoft — Business Overview

What does Microsoft do?

Microsoft is a diversified technology company that sells software, cloud services, devices, and gaming products to consumers and businesses worldwide. Founded in 1975 and employing approximately 228,000 people as of June 30, 2025, Microsoft organizes its business into three reporting segments:

The Intelligent Cloud segment, anchored by Azure, has become the most strategically important part of the business. Azure is a broad cloud platform offering computing, storage, networking, artificial intelligence (AI), and machine learning services on a consumption basis — meaning customers pay for what they use, similar to a utility bill. AI-specific capabilities are increasingly central to Azure's growth story, with Microsoft offering everything from raw computing power for AI workloads to developer tools like Azure AI Foundry.

How does Microsoft make money?

Microsoft earns revenue through a mix of subscriptions, consumption-based pricing, licensing, advertising, and hardware sales. The largest and fastest-growing stream comes from cloud subscriptions and consumption services — primarily Azure (pay-as-you-go) and Microsoft 365 (monthly or annual subscriptions per user). On the productivity side, revenue grows as more users shift from buying Office software outright (a one-time license) to subscribing to Microsoft 365, and as Microsoft layers in higher-priced AI add-ons like Microsoft 365 Copilot (an AI-powered assistant embedded in Office apps).

Other revenue streams round out a diversified model. LinkedIn generates money through recruiting tools (Talent Solutions), marketing and advertising (Marketing Solutions), and premium subscriptions. The gaming business earns from Xbox hardware sales, Xbox Game Pass (a subscription library of games), and sales of individual game titles. Search advertising through Bing and partnerships with third-party websites contributes to the More Personal Computing segment. Enterprise software licenses — sold through volume agreements like Enterprise Agreements (multi-year contracts typically with large organizations) — remain a steady, if slower-growing, revenue base.

What market does Microsoft operate in?

Microsoft participates in several large and expanding technology markets, with cloud computing and AI at the center of its growth thesis. The global cloud services market encompasses infrastructure-as-a-service (IaaS, meaning rented computing hardware), platform-as-a-service (PaaS, meaning developer tools and environments), and software-as-a-service (SaaS, meaning subscription software). All three are growing as businesses shift workloads away from their own data centers. Enterprise software (covering productivity tools, ERP, and CRM systems) is a large, mature market that is being reinvigorated by the migration to cloud and AI-enabled features.

Secular tailwinds — long-term structural trends — strongly favor Microsoft's core businesses. The broad corporate adoption of AI is accelerating demand for cloud computing power, developer platforms, and AI-integrated productivity software. Microsoft has positioned AI as a horizontal layer across all three segments, from Copilot in Word and Excel to AI models running on Azure infrastructure. This gives it multiple ways to monetize the same underlying AI investment.

Who are Microsoft's main competitors?

Microsoft competes with a handful of hyperscale (very large-scale) cloud providers and a wide array of specialized software companies across its segments. In cloud infrastructure, Amazon Web Services (AWS) and Google Cloud are the primary rivals. Azure differentiates itself partly through hybrid cloud capabilities — helping companies connect their existing on-premises servers with Microsoft's public cloud — and through deep integration with Microsoft's own software stack. In productivity software, competitors include application vendors, web-based tools, and newer AI-first application companies, though the filing does not name them specifically.

The industry is a mix of concentrated at the top and fragmented at the edges. The cloud infrastructure market is dominated by three players (Microsoft, Amazon, Google), while markets like cybersecurity, business applications (where Dynamics competes), and search advertising remain more fragmented. Microsoft claims advantages from scale — its global datacenter network lowers per-unit costs — and from breadth, meaning a customer can buy cloud infrastructure, productivity software, security tools, and developer platforms all from one vendor, reducing complexity.

Where does Microsoft operate?

Microsoft operates globally, with a presence across the Americas, Asia Pacific, Europe, and the Middle East. It runs regional operations service centers in all four of these areas, handling customer contracts, billing, and cloud operations. Its datacenter network spans these same regions, and the company continues to expand capacity specifically to meet growing AI workload demand — noting that datacenter buildout depends on access to land, energy, networking supplies, and specialized hardware like GPUs (graphics processing units, the chips most commonly used to train and run AI models).

Manufacturing of devices is outsourced to third-party manufacturers, with some geographic flexibility built in. Microsoft does not make its own Surface devices or Xbox consoles in-house; it contracts external manufacturers and has taken steps to be able to shift production geographically if needed. The filing notes that few qualified suppliers exist for certain server and device components, which creates concentration risk in the supply chain. Microsoft also flags exposure to a wide range of international regulations — including the EU's Digital Markets Act and Digital Services Act — which require dedicated compliance functions in those jurisdictions.