Summary
Microsoft Corporation (MSFT) reported strong financial results for the quarter and six months ending December 31, 2025. Revenue saw a significant increase of 17% and 18% respectively, driven by robust performance in its Intelligent Cloud and Productivity and Business Processes segments. Net income surged by 60% for the quarter and 36% for the six-month period, largely influenced by substantial gains from its investment in OpenAI, which offset prior period losses. The company continues to invest heavily in AI infrastructure and talent, impacting gross margin percentages but driving future growth opportunities. Key financial metrics demonstrate sustained growth, with Microsoft Cloud revenue up 26% year-over-year. Despite increased operating expenses, primarily due to R&D investments, operating income also saw a healthy increase of 21% for the quarter. The company maintained a strong liquidity position and continued its commitment to returning capital to shareholders through share repurchases and dividends. However, investors should remain aware of ongoing legal matters, particularly the IRS audit concerning transfer pricing, and potential impacts from intense competition and evolving regulatory landscapes.
Financial Highlights
54 data points| Revenue | $81.27B |
| Cost of Revenue | $25.98B |
| Gross Profit | $55.30B |
| R&D Expenses | $8.50B |
| Operating Expenses | $17.02B |
| Operating Income | $38.27B |
| Net Income | $38.46B |
| EPS (Basic) | $5.18 |
| EPS (Diluted) | $5.16 |
| Shares Outstanding (Basic) | 7.43B |
| Shares Outstanding (Diluted) | 7.46B |
Key Highlights
- 1Total revenue increased by 17% to $81.3 billion for the quarter and 18% to $158.9 billion for the six months ended December 31, 2025.
- 2Net income saw substantial growth, up 60% to $38.5 billion for the quarter and 36% to $66.2 billion for the six months, significantly boosted by gains from its OpenAI investment.
- 3Intelligent Cloud revenue grew by 29% year-over-year, driven by Azure and other cloud services, which saw a 39% increase.
- 4Productivity and Business Processes revenue increased by 16%, with Microsoft 365 Commercial cloud revenue up 17% and Microsoft 365 Consumer cloud revenue up 27%.
- 5The company made significant investments in R&D, particularly in compute capacity and AI talent, contributing to a 7% increase in R&D expenses for the quarter.
- 6Microsoft Cloud revenue increased 26% to $51.5 billion for the quarter, underscoring the strength of its cloud offerings.
- 7Despite strong revenue growth, gross margin percentage slightly decreased due to continued investments in AI infrastructure and growing AI product usage.