Executive Summary
Microsoft delivered a standout QQ1 2025 performance with quarterly revenue of USD 65.585 billion, marking a year-over-year increase of approximately 16% and a modest sequential gain of about 1.3%. The quarter benefited from resilient demand across its Productivity and Business Processes, Intelligent Cloud, and More Personal Computing segments, with gross profit of USD 45.486 billion and a robust operating income of USD 30.552 billion, resulting in an operating margin of 46.6% and a net margin of 37.6%. Net income reached USD 24.667 billion, and diluted earnings per share (EPS) stood at USD 3.30–3.32, reflecting continued efficiency and scale advantages.
Cash generation remained exceptionally strong, with operating cash flow of USD 34.18 billion and free cash flow of USD 19.26 billion for the quarter. The company deployed a disciplined capital allocation program, including USD 5.57 billion in dividends and USD 4.11 billion of net share repurchases, contributing to a healthy balance sheet and shareholder value creation. Microsoft’s balance sheet shows substantial liquidity, with cash and cash equivalents of USD 20.84 billion and total cash, cash equivalents, and short-term investments of USD 78.43 billion. The firm maintains a conservative debt posture, evidenced by a net debt of USD 40.64 billion and solid liquidity ratios (current ratio ~1.30).
Looking ahead, management maintains a constructive stance on cloud and AI-driven growth, supported by ARR expansion in Azure and productivity tools, ongoing AI integration across product lines, and continued enterprise software adoption. In the context of industry dynamics, Microsoft remains well-positioned to monetize AI-enabled offerings and cloud services, though continued execution in a competitive landscape (AWS, Google Cloud) and macro volatility remain key watch items for investors.
Key Performance Indicators
Key Insights
Revenue and profitability: Revenue USD 65.585B in Q1 2025, up 16.04% year over year and up 1.33% quarter over quarter. Gross profit USD 45.486B; gross margin 69.35% (0.6935). Operating income USD 30.552B; operating margin 46.58% (0.4658). Net income USD 24.667B; net margin 37.61% (0.3761). Earnings per share (EPS) USD 3.32 (diluted USD 3.30) with weighted average shares ~7.433B.
Expense structure: Research and development USD 7.544B; SG&A USD 7.390B; total operating expenses USD 14.934B. In...
Financial Highlights
Revenue and profitability: Revenue USD 65.585B in Q1 2025, up 16.04% year over year and up 1.33% quarter over quarter. Gross profit USD 45.486B; gross margin 69.35% (0.6935). Operating income USD 30.552B; operating margin 46.58% (0.4658). Net income USD 24.667B; net margin 37.61% (0.3761). Earnings per share (EPS) USD 3.32 (diluted USD 3.30) with weighted average shares ~7.433B.
Expense structure: Research and development USD 7.544B; SG&A USD 7.390B; total operating expenses USD 14.934B. Interest expense USD 0.582B; depreciation and amortization USD 7.383B; EBITDA USD 38.234B (EBITDA margin ~58.3%).
Cash flow and capitalization: Net cash provided by operating activities USD 34.18B; capital expenditures USD 14.923B; free cash flow USD 19.257B. Net income USD 24.667B drives strong earnings quality and cash conversion.
Balance sheet and liquidity: Cash and cash equivalents USD 20.84B; short-term investments USD 57.59B; total cash and short-term investments USD 78.43B. Total assets USD 523.01B; total liabilities USD 235.29B; total stockholders’ equity USD 287.72B. Current ratio 1.30; debt to capitalization 0.176; net debt USD 40.64B. Dividend payout USD 5.574B; net share repurchases USD 4.107B; other financing activities negative USD 8.89B for the period.
Valuation and margins: Gross margin 69.35%; operating margin 46.58%; net margin 37.61%. Key efficiency metrics include ROE ~8.57% and ROIC around 7.49%. Price-based multiples (as context from peer data) show P/E around 32.4x, P/B around 11.1x, and P/S around 48.8x, underscoring a premium valuation consistent with Microsoft’s dominant position in cloud, AI, and enterprise software.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
65.59B |
16.04% |
1.33% |
| Gross Profit |
45.49B |
13.11% |
0.98% |
| Operating Income |
30.55B |
13.60% |
9.41% |
| Net Income |
24.67B |
10.66% |
11.94% |
| EPS |
3.32 |
10.67% |
12.16% |
Key Financial Ratios
operatingProfitMargin
46.6%
operatingCashFlowPerShare
$4.6
freeCashFlowPerShare
$2.59
dividendPayoutRatio
22.6%
Management Commentary
No earnings call transcript was provided in the dataset. As a result, there are no management remarks or quotes to summarize by themes such as strategy, operations, or market conditions within this delivery.
No quotes available from the provided earnings transcript dataset.
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No quotes available from the provided earnings transcript dataset.
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Forward Guidance
The dataset does not include explicit forward guidance from Microsoft for QQ2 2025 or beyond. Nevertheless, the QQ1 2025 results reinforce a constructive outlook anchored in cloud platform strength (Azure), AI-enabled productivity and cloud services, and enterprise software demand. Given the large addressable opportunity in AI-enabled solutions and the ongoing transition of customers to cloud-native and modern workplace solutions, management is likely to maintain a multi-year growth trajectory driven by Azure-consumption growth, AI licensing and integration, and LinkedIn and Dynamics 365 performance. Investors should monitor: (1) Azure and cloud services growth metrics and ARR/ACV progression, (2) monetization of AI features and Copilot-related offerings across productive workloads, (3) enterprise IT budgets and modernization cycles, (4) pricing discipline and competitive dynamics in cloud and AI, and (5) ongoing capital allocation policy including buybacks and dividend sustainability.