Microsoft quarterly results lifted by AI & cloud revenue gains

Microsoft has reported growth in revenue, operating income, and net income for its third financial quarter, reflecting continued demand for its cloud and AI offerings.

The company's revenue for the period ending 31 March 2025 reached USD $70.1 billion, an increase of 13%, or 15% in constant currency, compared to the previous year. Operating income stood at USD $32.0 billion, up 16% (19% in constant currency), while net income rose by 18% to USD $25.8 billion (19% in constant currency). Diluted earnings per share grew by 18% to USD $3.46.

Microsoft attributed the performance in large part to its cloud and artificial intelligence operations. Chairman and Chief Executive Officer, Satya Nadella, said, "Cloud and AI are the essential inputs for every business to expand output, reduce costs, and accelerate growth. From AI infra and platforms to apps, we are innovating across the stack to deliver for our customers."

Chief Financial Officer Amy Hood highlighted the growth in cloud revenue: "We delivered a strong quarter with Microsoft Cloud revenue of USD $42.4 billion, up 20% (up 22% in constant currency) year-over-year driven by continued demand for our differentiated offerings."

Segment performance varied, with the 'Productivity and Business Processes' segment generating USD $29.9 billion in revenue, up 10% or 13% in constant currency. Microsoft 365 Commercial products and cloud services revenue increased by 11% (up 14% in constant currency), and Microsoft 365 Consumer products and cloud services saw revenue climb 10% (up 12% in constant currency). LinkedIn revenue was up 7% (8% in constant currency), while Dynamics products and cloud services rose 11% (13% in constant currency) driven by Dynamics 365 growth of 16% (18% in constant currency).

The company's 'Intelligent Cloud' business posted revenue of USD $26.8 billion, an increase of 21% (22% in constant currency). This was led by an increase of 22% (24% in constant currency) in server products and cloud services revenue, with Azure and other cloud services up 33% (35% in constant currency).

In the 'More Personal Computing' segment, revenue climbed 6% (7% in constant currency) to USD $13.4 billion. Windows OEM and Devices revenue increased by 3%, Xbox content and services revenue rose 8% (9% in constant currency), and search and news advertising revenue excluding traffic acquisition costs grew 21% (23% in constant currency).

During the quarter, Microsoft returned USD $9.7 billion to shareholders through dividends and share repurchases.

The company stated that it would provide guidance for future quarters in connection with its earnings announcement.

The financial statements showed that, for the three months ended 31 March 2025, Microsoft's product revenue was USD $15.3 billion compared with USD $17.1 billion a year earlier, while service and other revenue increased to USD $54.7 billion from USD $44.8 billion. Gross margin for the quarter reached USD $48.1 billion, up from USD $43.4 billion.

Research and development expenditure was USD $8.2 billion for the quarter, with sales and marketing costs at USD $6.2 billion, and general and administrative expenses at USD $1.7 billion.

The balance sheet as at 31 March 2025 showed total assets of USD $562.6 billion, up from USD $512.2 billion as at June 2024. Cash and cash equivalents stood at USD $28.8 billion, and total current assets were USD $156.6 billion.

Microsoft's statement acknowledged ongoing risks and uncertainties, referencing competitive pressures, the focus on cloud-based and AI services, significant investment in products and services, and the potential impact of regulatory developments.

Among operational risks highlighted were cybersecurity threats, supply chain issues, government regulation, and challenges associated with international operations, including currency fluctuations and geopolitical events.

The company noted that quarterly improvements in revenue and profitability were a result of continued investment in research and development, aimed at providing new and enhanced products and services to customers across various segments, including cloud, productivity, and personalised computing.

As per the release, Microsoft cloud and AI services remain the company's focus areas, generating the majority of the revenue gains in the latest quarter. The company's diverse revenue base is underpinned by growth in both commercial and consumer products linked to its core business productivity and computing solutions.