Executive Summary
Microsoft delivered a robust QQ2 2025 performance, underpinned by sustained demand for cloud services, AI-enabled productivity tools, and an expansive software ecosystem. Recorded revenue of $69.632 billion for the quarter, up 12.27% year-over-year and 6.17% sequentially, with gross profit of $47.833 billion and a net income of $24.108 billion (EPS $3.24). The Intelligent Cloud segment remained the primary profit engine, supported by Azure, Nuance, and GitHub contributions, while Productivity and Business Processes and More Personal Computing continued to contribute meaningfully to the top line. Free cash flow generation remained solid, reinforcing Microsoft’s capacity to fund strategic investments and capital returns.
From a balance sheet and cash-flow perspective, Microsoft exhibited a resilient liquidity profile and durable margins. Operating cash flow reached $22.291 billion; capital expenditures were $15.804 billion; resulting free cash flow was $6.487 billion for the quarter. The company continues to deploy capital with a balanced approach to investments, debt management, and shareholder returns, including ongoing share repurchases and dividends. While the core growth drivers remain compelling, management faces the ongoing challenge of sustaining double-digit cloud growth amid evolving macro conditions and currency dynamics, as well as competition in the cloud and AI spaces.
Overall, the QQ2 2025 results reinforce Microsoft’s position as a high-quality software and cloud platform provider with strong profitability, a fortress balance sheet, and a multi-year growth trajectory driven by AI-infused offerings and cloud-native platforms. Investors should monitor cloud growth tempo, AI adoption pace, and competitive dynamics as key drivers of continued outperformance.
Key Performance Indicators
Key Insights
Revenue: $69.632B, YoY +12.27%, QoQ +6.17%; Gross Profit: $47.833B, Gross Margin 68.69% (YoY +12.82%, QoQ +5.16%); Operating Income: $31.653B, Margin 45.46% (YoY +17.09%, QoQ +3.60%); Net Income: $24.108B, Margin 34.62% (YoY +10.23%, QoQ -2.27%); EPS (Diluted): $3.23, Notable YoY Growth ~10.20% and QoQ decline ~2.41%; Diluted EPS: $3.23; Weighted Avg Shares: 7.435B.
Cash Flow and Financial Position: Net cash provided by operating activities $22.291B; Capex $15.804B; Free cash flow $6.487B; Cash...
Financial Highlights
Revenue: $69.632B, YoY +12.27%, QoQ +6.17%; Gross Profit: $47.833B, Gross Margin 68.69% (YoY +12.82%, QoQ +5.16%); Operating Income: $31.653B, Margin 45.46% (YoY +17.09%, QoQ +3.60%); Net Income: $24.108B, Margin 34.62% (YoY +10.23%, QoQ -2.27%); EPS (Diluted): $3.23, Notable YoY Growth ~10.20% and QoQ decline ~2.41%; Diluted EPS: $3.23; Weighted Avg Shares: 7.435B.
Cash Flow and Financial Position: Net cash provided by operating activities $22.291B; Capex $15.804B; Free cash flow $6.487B; Cash and cash equivalents $17.482B; Short-term investments $54.069B; Total cash and short-term investments $71.551B; Total debt $62.224B; Net debt (per dataset) listed as $44.742B (note: cash balances imply a net cash position; the data shows an inconsistency that should be reconciled in the company’s filings).
Balance Sheet Health: Total assets $533.898B; Total liabilities $231.203B; Total stockholders’ equity $302.695B. Liquidity ratios show current ratio 1.351, quick ratio 1.342, and cash ratio 0.161, indicating solid near-term liquidity with ample liquidity reserves to support ongoing AI/cloud investment cycles.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
69.63B |
12.27% |
6.17% |
| Gross Profit |
47.83B |
12.82% |
5.16% |
| Operating Income |
31.65B |
17.09% |
3.60% |
| Net Income |
24.11B |
10.23% |
-2.27% |
| EPS |
3.24 |
10.20% |
-2.41% |
Key Financial Ratios
operatingProfitMargin
45.5%
operatingCashFlowPerShare
$3
freeCashFlowPerShare
$0.87
dividendPayoutRatio
25.6%
Management Commentary
Not available in the provided dataset. Earnings call transcript is not included, so management color on strategic priorities and near-term guidance is not extractable from the provided information.
Forward Guidance
No explicit forward-looking targets or numeric guidance were provided in the supplied data set. Based on the QQ2 2025 results and the platform dynamics described in the period, the following qualitative outlook applies:
- Cloud and AI-driven demand: Expect continued resilience in Intelligent Cloud (Azure and related services) and accelerated adoption of AI-enabled productivity tools within Microsoft 365, GitHub, and Nuance. A sustained growth trajectory in Azure is a core driver of future profitability.
- Margin resilience: The reported operating margin of approximately 45.5% reflects a high-margin software and cloud mix; continued efficiency improvements and AI-driven productivity enhancements could support further margin stability, even as investment spend in AI and data center capacity remains elevated.
- Capital allocation: With ample liquidity and strong FCF, Microsoft should remain committed to strategic capex, share repurchases, and dividends. Any shift in capital allocation strategy or changes in tax policy could influence the near-term payout profile and buyback cadence.
- Risks to monitor: Enterprise IT macro headwinds, currency effects, competitive pressure from hyperscalers (AWS, Google Cloud), and regulatory scrutiny around AI and data privacy in multiple jurisdictions.
Overall, absent a material macro shock or AI market disruption, a constructive, above-market trajectory for revenue growth and durable profitability remains plausible, anchored by Azure, M365, LinkedIn, and Nuance contributions.