10-QPeriod: Q2 FY2025

MICROSOFT CORP Quarterly Report for Q2 Ended Dec 31, 2024

Filed January 29, 2025For Securities:MSFT

Summary

Microsoft Corporation (MSFT) reported strong financial results for the second quarter of fiscal year 2025, demonstrating robust growth across its key business segments. Total revenue saw a significant increase of 12% year-over-year, reaching $69.6 billion, primarily driven by the Intelligent Cloud and Productivity and Business Processes segments. Net income also showed healthy growth, increasing by 10% to $24.1 billion, with diluted earnings per share rising to $3.23. The company continues to invest heavily in cloud infrastructure and artificial intelligence, which is reflected in increased operating expenses and a slight decrease in Microsoft Cloud gross margin percentage. Despite these investments, the company's strategic focus on cloud and AI appears to be yielding positive results, as evidenced by strong revenue growth in Azure and Microsoft 365. Microsoft's balance sheet remains strong, with substantial cash, cash equivalents, and short-term investments totaling $71.6 billion. The company continues to return capital to shareholders through share repurchases and dividends, underscoring its financial stability and commitment to shareholder value. Investors will likely view these results positively, indicating continued strong performance and strategic execution.

Financial Highlights

54 data points
Beta

Revenue

$69.63B

68.7% Gross Margin

Net Income

$24.11B

34.6% Net Margin

EPS (Diluted)

$3.23

Total Assets

$533.90B

Cash & Equivalents

$17.48B

Free Cash Flow

$6.49B

Financial Statements
Beta
Revenue$69.63B
Cost of Revenue$21.80B
Gross Profit$47.83B
R&D Expenses$7.92B
Operating Expenses$16.18B
Operating Income$31.65B
Net Income$24.11B
EPS (Basic)$3.24
EPS (Diluted)$3.23
Shares Outstanding (Basic)7.43B
Shares Outstanding (Diluted)7.47B

Key Highlights

  • 1Total revenue increased by 12% to $69.6 billion for the three months ended December 31, 2024.
  • 2Net income grew by 10% to $24.1 billion, with diluted EPS reaching $3.23.
  • 3Intelligent Cloud revenue increased by 19%, driven by Azure and other cloud services, with AI services contributing significantly to growth.
  • 4Productivity and Business Processes revenue increased by 14%, led by Microsoft 365 Commercial cloud growth.
  • 5Microsoft Cloud revenue grew 21% to $40.9 billion.
  • 6The company continues to invest significantly in AI infrastructure, impacting Cloud gross margin percentage, which decreased to 70%.
  • 7Microsoft returned $9.7 billion to shareholders through share repurchases ($1.7 billion) and dividends ($8.0 billion) in the quarter.

Frequently Asked Questions

Microsoft's cloud business showed strong performance, with Microsoft Cloud revenue increasing by 21% to $40.9 billion. This growth was primarily driven by Azure and other cloud services, which saw a 31% revenue increase, including a significant contribution from AI services. Microsoft 365 Commercial cloud revenue also grew by 16%.

Microsoft is making substantial investments in scaling its AI infrastructure, which has led to a slight decrease in the Microsoft Cloud gross margin percentage to 70%. While this impacts short-term profitability, it is a strategic investment for future growth in AI services.

Microsoft is actively returning capital to shareholders. In the second quarter of fiscal year 2025, the company repurchased approximately $1.7 billion of its common stock and declared dividends totaling $8.0 billion. As of December 31, 2024, $4.0 billion remained authorized under its existing share repurchase program, and a new $60 billion program was approved.

The More Personal Computing segment revenue was relatively unchanged year-over-year for the three months ended December 31, 2024. While Windows OEM and Devices revenue saw a modest increase, this was offset by a decline in Gaming revenue due to lower Xbox hardware sales, though Xbox content and services revenue saw growth. Search and news advertising revenue showed strong growth.