Microsoft Corporation (MSFT) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary shows strong financial performance across various segments, with significant growth in Microsoft Cloud, AI infrastructure, and other products. The Q&A section reveals confidence in managing AI-related risks and strategic investments in Azure, despite some ambiguity in CapEx alignment. The positive revenue and operating income growth, alongside optimistic guidance, suggest a positive stock price movement. However, the lack of specific guidance on CapEx alignment slightly tempers expectations, resulting in a positive rather than strong positive rating.
Key Financial Performance
Microsoft Cloud annual revenue $168 billion, up 23% year-over-year, driven by innovation and AI product suite expansion.
Azure annual revenue $75 billion, up 34% year-over-year, attributed to growth across workloads and AI infrastructure leadership.
Microsoft Fabric revenue Up 55% year-over-year, with over 25,000 customers, marking it as the fastest-growing database product in company history.
Revenue for fiscal year 2025 $281 billion, up 15% year-over-year, reflecting broad strength in products and services.
Operating income for fiscal year 2025 $128 billion, up 17% year-over-year, driven by strong execution and investment in opportunities.
Q4 2025 revenue $76.4 billion, up 18% year-over-year, with strong execution by sales and partner teams.
Microsoft Cloud Q4 revenue $46.7 billion, up 27% year-over-year, driven by AI infrastructure scaling and efficiency gains.
Productivity and Business Processes revenue $33.1 billion, up 16% year-over-year, driven by M365 Commercial and Consumer products and services.
Intelligent Cloud revenue $29.9 billion, up 26% year-over-year, driven by Azure and on-premises server business.
More Personal Computing revenue $13.5 billion, up 9% year-over-year, driven by Windows OEM and Xbox content and services.
LinkedIn revenue Up 9% year-over-year, with growth across all businesses despite hiring market weakness.
Dynamics 365 revenue Up 23% year-over-year, with growth across all workloads due to strong annuity sales motions.
Gaming revenue Up 10% year-over-year, driven by Xbox content and services and successful game launches.
Free cash flow for Q4 2025 $25.6 billion, driven by strong cloud billings and collections.
You have reached the limit. Sign up to access full content
Get started
Operating Highlights
Microsoft Cloud: Surpassed $168 billion in annual revenue, up 23%. Building a comprehensive suite of AI products and tech stack.
Azure: Surpassed $75 billion in annual revenue, up 34%. Opened new data centers across 6 continents, now with over 400 data centers in 70 regions. Introduced Microsoft Sovereign Cloud for data residency and sovereignty requirements.
Microsoft Fabric: Revenue up 55% year-over-year with over 25,000 customers. Fastest-growing database product in company history.
Copilot Apps: Surpassed 100 million monthly active users. Microsoft 365 Copilot adoption growing rapidly with record seat additions.
GitHub Copilot: 20 million users, with enterprise customers increasing 75% quarter-over-quarter. 90% of Fortune 100 companies use it.
Dragon Copilot: Used in healthcare to document over 13 million physician-patient encounters this quarter, up nearly 7x year-over-year.
Azure Expansion: Opened new data centers across 6 continents, now with over 400 data centers in 70 regions. Expanded AI-first regions with liquid cooling capabilities.
Gaming: 500 million monthly active users across platforms. Game Pass annual revenue nearly $5 billion for the first time.
LinkedIn: 1.2 billion members with 4 consecutive years of double-digit member growth. Comments rose over 30%, and video uploads increased over 20% this year.
AI Infrastructure: Scaled data center capacity faster than competitors, adding over 2 gigawatts of new capacity in 12 months. Improved efficiency with 90% more tokens for the same GPU compared to a year ago.
Security: Launched over 100 new capabilities, including a modern data lake for Microsoft Sentinel. Extended governance and security systems to protect AI agents.
Operational Efficiency: Operating income increased 23% year-over-year. Focused on delivering revenue growth and operational agility.
AI and Quantum Investments: Announced the world's first operational deployment of a Level 2 Quantum computer. Launched Azure AI Foundry to help customers design and manage AI applications.
Consumer and Business Apps: Introduced Copilot Mode in Edge and expanded Copilot features across Microsoft 365 and Windows 11. Dynamics 365 gained market share with new customers in various industries.
You have reached the limit. Sign up to access full content
Get started
Risk or Challenges
Capacity Constraints: Microsoft is experiencing capacity constraints in its Azure services, which are expected to persist through the first half of the fiscal year. This could limit the company's ability to meet strong demand for its cloud and AI offerings.
Scaling AI Infrastructure: The company is scaling its AI infrastructure, which has led to a decrease in Microsoft Cloud gross margin percentage. This could impact profitability as the company continues to invest heavily in AI.
Regulatory and Compliance Risks: Microsoft's expansion into AI and cloud services, including the introduction of Microsoft Sovereign Cloud, may face regulatory and compliance challenges, especially in regions with stringent data residency and sovereignty requirements.
Economic Uncertainty: Weakness in the hiring market has impacted LinkedIn's Talent Solutions revenue growth, reflecting broader economic uncertainties that could affect other business segments.
Gaming Revenue Volatility: Gaming revenue is expected to decline in the mid to high single digits in the next quarter, driven by strong prior-year comparables and potential variability in Xbox content and services revenue.
Inventory Levels: Elevated inventory levels in Windows OEM and Devices could lead to revenue declines in the mid- to high single digits, impacting the More Personal Computing segment.
On-Premises Server Business Decline: Revenue from on-premises server business is expected to decline in the low to mid-single digits as customers continue to shift to cloud offerings, which could affect overall revenue growth.
Foreign Exchange Impact: Fluctuations in foreign exchange rates could impact revenue growth, particularly in segments like Productivity and Business Processes and Intelligent Cloud.
You have reached the limit. Sign up to access full content
Get started
Guidance & Outlook
Revenue Growth FY '26: Microsoft expects to deliver another year of double-digit revenue and operating income growth in FY '26, driven by strong demand for cloud and AI offerings and a significant contracted backlog.
Capital Expenditures FY '26: Capital expenditure growth will moderate compared to FY '25, with a greater mix of short-lived assets. Growth rates in H1 will be higher than in H2 due to the timing of delivery of additional capacity.
Operating Margins FY '26: Operating margins are expected to remain relatively unchanged year-over-year.
Effective Tax Rate FY '26: The effective tax rate is expected to be between 19% and 20%.
Q1 FY '26 Revenue Growth: FX is expected to increase total revenue growth by 2 points. Productivity and Business Processes revenue is expected to grow 14% to 15%, Intelligent Cloud revenue by 25% to 26%, and More Personal Computing revenue is expected to decline.
Azure Revenue Growth Q1 FY '26: Azure revenue is expected to grow approximately 37% in constant currency, driven by strong demand for services, though capacity constraints are expected to persist through the first half of FY '26.
Microsoft Cloud Gross Margin Q1 FY '26: Gross margin percentage is expected to be roughly 67%, down year-over-year due to scaling AI infrastructure.
Gaming Revenue Q1 FY '26: Gaming revenue is expected to decline in the mid to high single digits against a strong prior year comparable.
You have reached the limit. Sign up to access full content
Get started
Shareholder Return Plan
Dividends: We returned $9.4 billion to shareholders through dividends and share repurchases, bringing our total cash return to shareholders to over $37 billion for the full fiscal year.
Share Repurchase: We returned $9.4 billion to shareholders through dividends and share repurchases, bringing our total cash return to shareholders to over $37 billion for the full fiscal year.
You have reached the limit. Sign up to access full content
Get started
Key Q&A
Q:How does Microsoft manage the risk versus reward with emerging AI labs and AI start-ups that could become competitors?
A:Satya Nadella explained that Microsoft has always dealt with emerging companies shaping new platforms. He emphasized that the largest AI workloads run on Azure, which helps Microsoft optimize its platform and products. He also mentioned tracking both head app usage and Tier 2 applications to ensure broad diffusion and platform shaping.
Q:What is the best way for software companies to monetize AI for SaaS, and how should they think about SaaS AI margins over the long term?
A:Satya Nadella compared the AI transition to the server-to-cloud transition, emphasizing the need for efficient compute usage. He highlighted the evolution of SaaS apps incorporating agentic and chat interfaces, as well as autonomous agents. Amy Hood added that monetization models will blend per-user logic, consumption tiers, and AI model capabilities, allowing teams to throttle usage and optimize models.
Q:What are the catalysts driving the migration from on-prem to Azure, and how durable is this trend?
A:Satya Nadella identified three catalysts: migrations (e.g., SAP instances like Nestle's), scaling of cloud-native applications, and new AI workloads. He noted that these factors are building on each other and that the migration trend is still in its middle stages.
Q:Was there anything surprising about the strength across the board in the quarter?
A:Satya Nadella stated that while nothing was particularly surprising, the platform's evolution into more stateful app patterns and robust frameworks for building applications stood out. He highlighted the rapid development of sophisticated applications and the maturity of the stack.
Q:What are customers' perspectives on Copilot and its broader implications?
A:Satya Nadella explained that customers see Copilot as a starting point, with broader applications emerging, such as agents performing asynchronous work. He emphasized the importance of UI for instructing and monitoring work and noted that this trend is evident across M365, Dynamics 365, and GitHub.
Q:What is the outlook for CapEx in relation to Azure growth, and how should we think about the shape of the curve?
A:Amy Hood emphasized that CapEx investments are correlated with Microsoft's $368 billion contracted backlog. She noted that demand continues to grow, and the focus is on building capacity to meet this demand. Satya Nadella added that software optimization will enhance hardware efficiency, and both leaders stressed the importance of compounding growth rather than focusing on a specific pivot point.
Q:How is Microsoft managing operating margins while absorbing the mix shift towards AI-focused offerings?
A:Amy Hood highlighted that revenue growth, product innovation, and efficiency improvements across the stack are key to managing margins. She emphasized the importance of delivering competitive products and leveraging internal AI-driven productivity gains to offset costs.
Q:Review of Unclear Management Responses
A:Management avoided providing a direct answer to the question about the specific timeline for when revenue growth and CapEx growth will align. Amy Hood and Satya Nadella focused on the importance of building capacity and compounding growth, avoiding a clear timeline or specific details.
You have reached the limit. Sign up to access full content
Get started
Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI application
AI model
AI product
Agent
COGS
Commercial Products
Group
LLC Research
Minecraft
Neilson Vice
OEM Devices
Office purchasing
Quantum
Research Division
USD point
Wells Fargo
agent Teams
benefit FX
browser
care
cloud service
context
control
currency core
date
diffusion
efficiency gain
head
identity
income FY
mid digit
momentum
party partnership
point benefit
product cloud
rate FX
region
repos
task
token
MSFT Transcript
Microsoft Corporation (MSFT) Q2 2026 Earnings Call Transcript
Positive1-28
The earnings report reveals strong financial performance with significant revenue and EPS growth, driven by demand across various segments. Despite a decline in free cash flow, commercial bookings surged, indicating robust future growth. The Q&A highlighted confidence in CapEx investments and AI-centric hardware, though some concerns about ROI and backlog durability were not fully addressed. Overall, the positive financial metrics and optimistic guidance, especially in AI and cloud services, suggest a likely stock price increase, despite some investor concerns.
Microsoft Corporation (MSFT) Presents at Barclays 23rd Annual Global Technology Conference Transcript
Neutral12-11
Microsoft Corporation (MSFT) Presents at UBS Global Technology and AI Conference 2025 Transcript
Neutral12-2
Microsoft Corporation (MSFT) Q1 2026 Earnings Call Transcript
Positive10-29
The earnings call reveals strong financial performance with significant growth in free cash flow, commercial bookings, and cloud services revenue. Despite a decline in gaming revenue and cloud gross margin, the company maintains optimistic guidance for FY '26 with a focus on AI and cloud. The Q&A session addressed concerns about risks and investments, with management expressing confidence in their strategic positioning. The positive aspects, such as AI-driven growth and strategic partnerships, outweigh the negatives, suggesting a positive stock price movement.
MSFT Report
Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
How soon is the transcript available after the earnings call ends?
Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.
Is the transcript edited or altered in any way?
No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.
Why do some answers appear as “Unclear” or “Inaudible”?
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
