Microsoft capped its 2025 fiscal year (CY2025 Q2) with a massive earnings beat, propelling its market valuation past $4 trillion in after-hours trading.
The company reported revenue of $76.4 billion, an 18% jump over the previous year. Net income climbed even more swiftly, up 24% to $27.2 billion from the same quarter last year. Meanwhile, earnings per share reached $3.65, outpacing analyst estimates of $3.37.
“In our largest quarter of the year, we significantly exceeded expectations,” said CEO Satya Nadella on the earnings call.
Microsoft stock jumped from $513.8 to $551 following the release of the company’s financial results.
Microsoft Cloud Revenue Driving Growth
Microsoft Cloud made up the biggest source of revenue, generating $46.7 billion, an increase of 27% (up 25% in constant currency) year-over-year.
“Cloud and AI is the driving force of business transformation across every industry and sector,” said Nadella. “We’re innovating across the tech stack to help customers adapt and grow in this new era, and this year, Azure surpassed $75 billion in revenue, up 34 percent, driven by growth across all workloads.”
Microsoft operates more data centers than any other cloud provider, having opened new facilities across six continents. Nadella said in the earnings call that it now operates over 400 data centers across 70 regions.
He emphasized, “We continue to lead the AI infrastructure wave and gained market share every quarter this year.”
Microsoft now controls 24% of the global cloud infrastructure market, second only to AWS (30%), but has been gaining steadily.
Xbox Services Grow As Hardware Sales Drop
The focus on cloud and services is also evident in Xbox sales. Revenue in More Personal Computing was $13.5 billion, an increase of 9%, fueled by a 13% increase in Xbox content and services revenue.
Hardware sales, however, decreased 22% year-on-year. Microsoft has focused on new ways to deliver products to customers, such as introducing accessibility tags, making it easier for users to search for titles.
Xbox hardware sales have declined consistently year-over-year for several years, trailing behind PS5 and Switch sales.
The company has been able to grow strongly despite the drop with its focus on cloud services, which is also fueling global gaming growth.
The online gaming market is expected to grow to $333 billion by 2030, primarily fueled by cloud services and mobile accessibility for gaming.
Microsoft Targets More Growth In FY2026
For FY2025, total revenue was $281.7 billion, an increase of 15%. Operating income increased 17% to $128.5 billion, and net income was $101.8 billion, up 16%. Diluted earnings per share was $13.64, which was also an increase of 16% year-on-year.
CFO Amy Hood said the company expects over $30 billion of capital expenditure for the first quarter of 2026, “driven by the continued strong demand signals we see.”
She added that she feels very confident that this spending is “directly tied to business that is already contracted and on the books — and that we need to deliver.”
When asked about the return on investment on this massive spending, Hood responded that Microsoft has $368 billion of contracted backlog across the “breadth of the Microsoft Cloud,” not just Azure.
