This article first appeared on GuruFocus.
Revenue: $77.7 billion, up 18% year over year.
Gross Margin Percentage: 69%, slightly down year over year.
Operating Income: Increased 24% year over year.
Earnings Per Share (EPS): $4.13, up 23% year over year.
Microsoft Cloud Revenue: $49.1 billion, up 26% year over year.
Commercial Bookings: Increased 112% year over year.
Commercial Remaining Performance Obligation (RPO): $392 billion, up 51% year over year.
Capital Expenditures: $34.9 billion, driven by demand for cloud and AI offerings.
Free Cash Flow: $25.7 billion, up 33% year over year.
Productivity and Business Processes Revenue: $33 billion, up 17% year over year.
Intelligent Cloud Revenue: $30.9 billion, up 28% year over year.
More Personal Computing Revenue: $13.8 billion, up 4% year over year.
Azure Revenue Growth: 40% year over year.
LinkedIn Revenue Growth: 10% year over year.
Dynamics 365 Revenue Growth: 18% year over year.
Release Date: October 29, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Microsoft Cloud revenue surpassed $49 billion, marking a 26% year-over-year increase.
Commercial bookings increased by 112%, driven by Azure commitments and large contracts.
Microsoft 365 Copilot adoption is accelerating, with over 90% of the Fortune 500 using it.
GitHub Copilot has over 26 million users, contributing to record usage and growth.
Strong financial performance with revenue of $77.7 billion, up 18%, and earnings per share of $4.13, up 23%.
Investments in AI have led to a slight decrease in gross margin percentage due to increased costs.
Azure is experiencing capacity constraints, impacting potential revenue growth.
The Talent Solutions business within LinkedIn is affected by continued weakness in the hiring market.
Operating expenses increased by 5%, driven by investments in cloud and AI engineering.
Gaming revenue decreased by 2%, reflecting challenges in maintaining growth in this segment.
Q: Satya, when we think about AGI or how application and computing architectures are changing, is there anything on the horizon that could potentially change Microsoft’s strong market positioning? A: Satya Nadella, CEO: We feel confident about our new agreement with OpenAI, which provides certainty in our IP relationship. The evolution of AI systems will require smoothing out jagged intelligence through systems like GitHub Agent HQ and M365 Copilot. We believe these systems will drive real-world value and customer returns, even as AI capabilities grow. We don’t foresee AGI being achieved soon, but we can drive significant value with current AI advancements.
Q: Amy, regarding the impressive bookings growth, can you address concerns about concentration risk and the breadth of these deals globally? A: Amy Hood, CFO: Our nearly $400 billion RPO balance is spread across multiple products and customer sizes, with a weighted average duration of two years. This indicates that most of it will be consumed soon, reflecting real-world value creation in our AI platforms. OpenAI is a part of this, and we’re learning and building leading systems at scale, benefiting all customers.
Q: How confident are you that the software and consumer internet business can monetize global AI investments, and are we in a bubble? A: Amy Hood, CFO: With $400 billion in RPO, our infrastructure needs are high for booked business today. We’re pivoting towards short-lived assets like GPUs and CPUs, matching contract durations. Demand is increasing across many areas, and we’re investing to meet this demand efficiently. We feel confident in our ability to monetize these investments.
Q: Can you explain the $4.1 billion in other income related to OpenAI, and what can we expect in subsequent quarters? A: Amy Hood, CFO: The Q1 number was not impacted by the new agreement with OpenAI. The increased loss was due to our percentage of losses in OpenAI equity method, reflecting increased losses from OpenAI.
Q: How do you evaluate the ability of AI-native companies to follow through on large contractual commitments, and how do you manage customer concentration risk? A: Satya Nadella, CEO: We build a fungible fleet for third-party and first-party use. We balance demand from digital natives and enterprises, ensuring our build is for a broad customer base. Our first-party apps provide leverage, and our portfolio gives us confidence in using our fleet to the maximum, mitigating concentration risk.
Q: Is there a way to quantify the revenue impact of Azure being short on capacity, and is there a risk of workloads going elsewhere? A: Amy Hood, CFO: It’s hard to quantify precisely, but Azure bears most of the revenue impact due to prioritization of M365 Copilot, security features, and GitHub momentum. We work hard to mitigate this, but Azure is directly impacted. The number could be higher if not for these constraints.
Q: Satya, can you offer perspective on Microsoft’s criteria for executing business and the terminal value on its balance sheet? A: Satya Nadella, CEO: We build a fungible fleet for third-party and first-party use. We balance demand from digital natives and enterprises, ensuring our build is for a broad customer base. Our first-party apps provide leverage, and our portfolio gives us confidence in using our fleet to the maximum, mitigating concentration risk.
Q: How do you ensure that your AI investments are not overbuilt for current demand and will sustain? A: Amy Hood, CFO: Our RPO balance and demand signals indicate strong usage patterns. We’re investing in short-lived assets like GPUs and CPUs, matching contract durations. Demand is increasing across many areas, and we’re investing to meet this demand efficiently. We feel confident in our ability to monetize these investments.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.