Microsoft Sees Cloud Growth Accelerate

Key Points

• Microsoft easily beat top and bottom line expectations, posting 18% revenue growth and 26% growth in cloud revenue.

• The company detailed Azure financials for the first time, saying the business surpassed $75 billion in sales in the now-complete fiscal year.

• Microsoft saw strong growth outside of cloud as well, with Xbox and productivity both up double digits.

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Here's our initial take on Microsoft's (NASDAQ: MSFT) fiscal 2025 fourth-quarter financial report.

Key Metrics

Microsoft Quantifies Cloud Impact

Microsoft easily topped expectations in its fiscal fourth quarter, reporting revenue up 18% and earnings per share up 24% year over year. Intelligent Cloud continued to lead the way, up 26% from a year ago, helping to fuel a 15% boost in net cash from operations to $42.6 billion.

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Gross margin for the quarter came in at 69%.

The company also provided a revenue number for its Azure cloud business for the first time, saying that the service surpassed $75 billion in sales for the entire fiscal year. That's up 34% from fiscal 2024.

"Cloud and AI is the driving force of business transformation across every industry and sector," CEO Satya Nadella said in a statement.

Intelligent Cloud was the standout, but Microsoft saw growth across its different sectors. Productivity and business processes revenue was up 16% thanks to Microsoft 365 commercial and consumer products, while More Personal Computing jumped by 9% in part thanks to 13% Xbox content and services growth.

For the full fiscal year, Microsoft grew revenue by 15% and operating income by 17%.

During the quarter, Microsoft returned $9.4 billion to shareholders in the form of dividends and share repurchases. The company ended the period with $94.6 billion in cash and short-term investments on its balance sheet.

Immediate Market Reaction

Investors were apparently cheering the results. Microsoft shares jumped 6% in after-market trading following the earnings release but ahead of the company's call with shareholders.

What to Watch

It is the start of a new fiscal year for Microsoft, and investors will be eager to hear forecasts about whether this growth rate can continue into fiscal 2026. Of particular interest will be any guidance on capex spending in the new year as Microsoft continues to invest in AI and data centers.

Microsoft has a well-diversified business with exposure to both the consumer and commercial customers and both large AI models and personal computer growth. While some of those businesses are vulnerable to economic headwinds and the threats of tariffs, the overall strength of the portfolio was evident in these results.

Microsoft and its big-tech rivals are in the early stages of turning their massive investments in cloud and AI into profits, but the results and new details of Azure are a big step in justifying that outsized expenditure. Investors are understandably excited about the company's potential to continue to convert that potential into profits.

Helpful Resources

• Full earnings report
• Investor relations page
• Additional coverage

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Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.