10-QPeriod: Q3 FY2025

MICROSOFT CORP Quarterly Report for Q3 Ended Mar 31, 2025

Filed April 30, 2025For Securities:MSFT

Summary

Microsoft Corporation (MSFT) reported strong financial results for the third quarter and first nine months of fiscal year 2025, with total revenue reaching $70.1 billion and $205.3 billion respectively, representing significant year-over-year growth. Net income also saw a substantial increase, reaching $25.8 billion for the quarter and $74.6 billion for the nine-month period, translating to diluted EPS of $3.46 and $9.99 respectively. The company highlighted robust performance across its key segments, particularly within Intelligent Cloud, driven by Azure and other cloud services, and Productivity and Business Processes, fueled by Microsoft 365 Commercial cloud offerings. The acquisition of Activision Blizzard continues to integrate, contributing to the More Personal Computing segment's growth. Investments in AI infrastructure are a notable theme, impacting gross margins but expected to drive future growth. Microsoft's financial position remains strong, with substantial cash and investments. The company continues to return capital to shareholders through dividends and share repurchases. Management expects continued strength and sufficient liquidity to fund operations and strategic initiatives, including ongoing investments in cloud and AI capabilities.

Financial Highlights

54 data points
Beta

Revenue

$70.07B

68.7% Gross Margin

Net Income

$25.82B

36.9% Net Margin

EPS (Diluted)

$3.46

Total Assets

$562.62B

Cash & Equivalents

$28.83B

Free Cash Flow

$20.30B

Financial Statements
Beta
Revenue$70.07B
Cost of Revenue$21.92B
Gross Profit$48.15B
R&D Expenses$8.20B
Operating Expenses$16.15B
Operating Income$32.00B
Net Income$25.82B
EPS (Basic)$3.47
EPS (Diluted)$3.46
Shares Outstanding (Basic)7.43B
Shares Outstanding (Diluted)7.46B

Key Highlights

  • 1Total revenue increased by 13% to $70.1 billion for the quarter and 14% to $205.3 billion for the nine months.
  • 2Net income rose by 18% to $25.8 billion for the quarter and 13% to $74.6 billion for the nine months.
  • 3Diluted earnings per share grew to $3.46 for the quarter and $9.99 for the nine months.
  • 4Intelligent Cloud revenue saw a 21% increase driven by Azure and other cloud services (33% growth, with 16 points from AI services).
  • 5Productivity and Business Processes revenue increased by 10% with strong performance in Microsoft 365 Commercial cloud (12% growth).
  • 6More Personal Computing revenue increased by 6%, with Search and news advertising revenue (ex TAC) up 21%.
  • 7Microsoft Cloud revenue grew 20% to $42.4 billion for the quarter, with a gross margin of 69%, impacted by AI infrastructure scaling.

Frequently Asked Questions

Revenue growth in the Intelligent Cloud segment was primarily driven by Azure and other cloud services, which saw a 33% increase. AI services contributed approximately 16 percentage points to this growth during the third quarter.

Microsoft acknowledges that investments in scaling AI infrastructure are impacting gross margins. For instance, the Microsoft Cloud gross margin percentage decreased to 69% for the quarter. The company views these investments as crucial for future growth and is focused on optimizing these costs over time.

Microsoft expects its existing cash, cash equivalents, short-term investments, and cash flows from operations to be sufficient for its operating activities and cash commitments for at least the next 12 months and beyond. The company continues to return capital to shareholders through dividends and share repurchases, and plans to invest further in sales, marketing, product support, advanced technology, and strategic acquisitions.

The acquisition of Activision Blizzard, completed in October 2023, is now integrated and contributing to the More Personal Computing segment's results. While specific revenue contributions are not broken out in detail for this quarter's summary, its impact is noted in the increased operating expenses and gross margin for the More Personal Computing segment over the nine-month period compared to the prior year.