Inside Microsoft’s Monster Quarter
Microsoft closed its fiscal year on a high note, delivering a Q4 FY25 that exceeded Wall Street’s expectations across nearly every metric. With revenue growth surging, cloud dominance intensifying, and Copilot adoption on the rise, the tech giant is flexing its muscle in nearly every vertical particularly in artificial intelligence. However, looming uncertainties in its relationship with OpenAI and capacity constraints pose potential speed bumps as it charges into FY26.
Record Revenue and Solid Margins
Microsoft posted $76.4 billion in revenue, up 18% year over year and a full $2.6 billion above estimates. Gross margin came in at 69% and operating margin increased 2 percentage points to 45%, underscoring Microsoft’s operational strength despite inflationary and CapEx pressures. EPS of $3.65 handily beat expectations by $0.27
Core Segments Breakdown
Intelligent Cloud led the charge with $29.9B (+26% Y/Y), powered by Azure’s standout 39% growth, well above its 34–35% guidance
Productivity and Business Processes climbed 16% to $33.1B, boosted by widespread Copilot adoption and M365 growth.
Personal Computing rose 9% to $13.5B, with Xbox content and search advertising offsetting weakness in hardware
Cloud and AI Continue to Dominate
Cloud now makes up 61% of total revenue, up from 57% a year ago. Azure in particular continues to lead, hitting $75 billion in annualized revenue closing the gap with AWS and widening the lead over Google Cloud
Despite this growth, Microsoft is capacity-constrained, with demand for AI workloads outpacing its data center infrastructure. This bottleneck has prevented even faster expansion. CapEx surged 27% Y/Y to $24.2 billion as the company scrambles to scale AI capacity
Other Business Drivers
M365 saw meaningful ARPU expansion due to price increases and subscriber growth (+8%).
Gaming, post Activision acquisition, stabilized with Game Pass helping absorb a hardware decline.
Search and ads (excluding traffic acquisition costs) rose 20% Y/Y, as Bing and Edge continue to absorb AI-enhanced features.
On the commercial side, bookings spiked 37% Y/Y, pushing remaining performance obligations to $368 billion, 35% of which is expected to convert within the next 12 months—signaling strong forward momentum
The OpenAI Dilemma
While Microsoft remains closely tied to OpenAI particularly through exclusive access to GPT5, expected imminently its Q4 revealed underlying friction. Microsoft reported $1.7 billion in "other expenses", mostly attributed to OpenAI’s operational losses. With both firms expanding AI capabilities independently, there’s rising speculation about strategic divergence, which could influence Microsoft’s AI trajectory in the years ahead
FY26 Outlook
Management forecasts double digit revenue and operating income growth for FY26. Azure is expected to grow ~37% in Q1, though data center constraints will linger into the first half. Notably, CapEx is expected to moderate, signaling a more balanced approach to infrastructure investment going forward
Microsoft’s Q4 FY25 results reinforce its position as the global AI and cloud leader. Azure’s outperformance, strong commercial bookings, and resilient margins suggest the company is executing at a high level. However, capacity limits and strategic uncertainty around OpenAI remain key variables to monitor. If Microsoft can successfully navigate these headwinds while maintaining innovation velocity, FY26 could mark another defining chapter in its AI dominance.
Microsoft closed its fiscal year on a high note, delivering a Q4 FY25 that exceeded Wall Street’s expectations across nearly every metric. With revenue growth surging, cloud dominance intensifying, and Copilot adoption on the rise, the tech giant is flexing its muscle in nearly every vertical particularly in artificial intelligence. However, looming uncertainties in its relationship with OpenAI and capacity constraints pose potential speed bumps as it charges into FY26.
Record Revenue and Solid Margins
Microsoft posted $76.4 billion in revenue, up 18% year over year and a full $2.6 billion above estimates. Gross margin came in at 69% and operating margin increased 2 percentage points to 45%, underscoring Microsoft’s operational strength despite inflationary and CapEx pressures. EPS of $3.65 handily beat expectations by $0.27
Core Segments Breakdown
Intelligent Cloud led the charge with $29.9B (+26% Y/Y), powered by Azure’s standout 39% growth, well above its 34–35% guidance
Productivity and Business Processes climbed 16% to $33.1B, boosted by widespread Copilot adoption and M365 growth.
Personal Computing rose 9% to $13.5B, with Xbox content and search advertising offsetting weakness in hardware
Cloud and AI Continue to Dominate
Cloud now makes up 61% of total revenue, up from 57% a year ago. Azure in particular continues to lead, hitting $75 billion in annualized revenue closing the gap with AWS and widening the lead over Google Cloud
Despite this growth, Microsoft is capacity-constrained, with demand for AI workloads outpacing its data center infrastructure. This bottleneck has prevented even faster expansion. CapEx surged 27% Y/Y to $24.2 billion as the company scrambles to scale AI capacity
Other Business Drivers
M365 saw meaningful ARPU expansion due to price increases and subscriber growth (+8%).
Gaming, post Activision acquisition, stabilized with Game Pass helping absorb a hardware decline.
Search and ads (excluding traffic acquisition costs) rose 20% Y/Y, as Bing and Edge continue to absorb AI-enhanced features.
On the commercial side, bookings spiked 37% Y/Y, pushing remaining performance obligations to $368 billion, 35% of which is expected to convert within the next 12 months—signaling strong forward momentum
The OpenAI Dilemma
While Microsoft remains closely tied to OpenAI particularly through exclusive access to GPT5, expected imminently its Q4 revealed underlying friction. Microsoft reported $1.7 billion in "other expenses", mostly attributed to OpenAI’s operational losses. With both firms expanding AI capabilities independently, there’s rising speculation about strategic divergence, which could influence Microsoft’s AI trajectory in the years ahead
FY26 Outlook
Management forecasts double digit revenue and operating income growth for FY26. Azure is expected to grow ~37% in Q1, though data center constraints will linger into the first half. Notably, CapEx is expected to moderate, signaling a more balanced approach to infrastructure investment going forward
Microsoft’s Q4 FY25 results reinforce its position as the global AI and cloud leader. Azure’s outperformance, strong commercial bookings, and resilient margins suggest the company is executing at a high level. However, capacity limits and strategic uncertainty around OpenAI remain key variables to monitor. If Microsoft can successfully navigate these headwinds while maintaining innovation velocity, FY26 could mark another defining chapter in its AI dominance.
🟣MasterClass moonypto.com/masterclass
🟢Signal moonypto.com/signal
🔵News t.me/moonypto
⚪ t.me/moonyptofarsi
🟢Signal moonypto.com/signal
🔵News t.me/moonypto
⚪ t.me/moonyptofarsi
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
🟣MasterClass moonypto.com/masterclass
🟢Signal moonypto.com/signal
🔵News t.me/moonypto
⚪ t.me/moonyptofarsi
🟢Signal moonypto.com/signal
🔵News t.me/moonypto
⚪ t.me/moonyptofarsi
Related publications
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.