Executive Summary
Microsoft delivered a solid QQ3 2025 with pronounced top-line strength and robust profitability. Revenue reached $70.07 billion, up 13.3% year over year (YoY) and 0.6% quarter over quarter (QoQ). The gross margin stood at 68.7%, yielding an operating margin of 45.7% and a net margin of 36.9%. EBITDA was $40.71 billion, underscoring the cash-generative nature of the business and the durable profitability of its software-centric model.
The company generated strong operating cash flow of $37.04 billion and free cash flow of $20.30 billion, supporting a healthy balance sheet with substantial liquidity. Cash and short-term investments totaled approximately $79.6 billion, while gross debt stood at $60.6 billion, leaving a net cash/debt position that reflects ample flexibility for continued capital allocation, including ongoing buybacks and shareholder dividends. The quarterly data also show positive momentum across the core segments, with Azure and productivity tools driving earnings quality, tempered by continued investments in AI, cybersecurity, and platform capabilities.
Looking ahead, investors should monitor Azure/Intelligent Cloud growth trajectories, Microsoft 365 adoption and monetization, and the impact of AI-enabled features across Windows, Office, LinkedIn, and Dynamics. Management commentary (where available) would typically frame the pace of AI-enabled product rollouts, enterprise demand, and competitive dynamics. Given the cash-generative profile and strong balance sheet, the company is well-positioned to sustain margin discipline and fund continued strategic investments, albeit with execution risk tied to cloud competition and enterprise IT budgets.
Key Performance Indicators
Key Insights
Revenue: $70.07B; YoY +13.27%; QoQ +0.62%
Gross Profit: $48.15B; YoY +11.06%; QoQ +0.66%
Operating Income: $32.00B; YoY +16.02%; QoQ +1.10%
Net Income: $25.82B; YoY +17.71%; QoQ +7.12%
EPS: $3.47 (GAAP), $3.46 (Diluted) ; YoY +17.63%; QoQ +7.10%
EBITDA: $40.71B; EBITDARatio: 0.5811
Gross Margin: 68.72%
Operating Margin: 45.67%
Net Margin: 36.86%
Effective Tax Rate: 17.7%
Cash Flow and Capital Allocation
Operating Cash Flow: $37.04B; Free Cash Flow: $20.30B; Capex: $16.75B
Net Income: $25.82B; C...
Financial Highlights
Revenue: $70.07B; YoY +13.27%; QoQ +0.62%
Gross Profit: $48.15B; YoY +11.06%; QoQ +0.66%
Operating Income: $32.00B; YoY +16.02%; QoQ +1.10%
Net Income: $25.82B; YoY +17.71%; QoQ +7.12%
EPS: $3.47 (GAAP), $3.46 (Diluted) ; YoY +17.63%; QoQ +7.10%
EBITDA: $40.71B; EBITDARatio: 0.5811
Gross Margin: 68.72%
Operating Margin: 45.67%
Net Margin: 36.86%
Effective Tax Rate: 17.7%
Cash Flow and Capital Allocation
Operating Cash Flow: $37.04B; Free Cash Flow: $20.30B; Capex: $16.75B
Net Income: $25.82B; Changes in Working Capital: $2.04B
Stock Repurchases (Net): $(4.78)B; Dividends Paid: $(6.17)B
Net Change in Cash: $11.35B; Cash at End of Period: $28.83B
Liquidity and Balance Sheet
Cash & Equivalents: $28.83B; Short-Term Investments: $50.78B; Total Cash & Investments: $79.61B
Total Debt: $60.57B; Net Debt (as reported): $31.74B
Total Assets: $562.62B; Total Liabilities: $240.73B; Total Stockholders’ Equity: $321.89B
Current Ratio: 1.37; Quick Ratio: 1.36; Cash Ratio: 0.25
Debt-to-Capitalization: 0.158; Debt-to-Equity: 0.188; Interest Coverage: 53.87x
Valuation Metrics (as of QQ3 2025)
P/E: 27.02x; P/B: 8.67x; P/S: 39.83x; P/FCF: 137.48x; EV/EBITDA: 69.33x
Dividend Yield: 0.22%
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
70.07B |
13.27% |
0.62% |
| Gross Profit |
48.15B |
11.06% |
0.66% |
| Operating Income |
32.00B |
16.02% |
1.10% |
| Net Income |
25.82B |
17.71% |
7.12% |
| EPS |
3.47 |
17.63% |
7.10% |
Key Financial Ratios
operatingProfitMargin
45.7%
operatingCashFlowPerShare
$4.98
freeCashFlowPerShare
$2.73
dividendPayoutRatio
23.9%
Management Commentary
Note: The earnings transcript data is not provided in the current dataset. As a result, management quotes or call-specific narrative cannot be quoted here. The analysis below reflects the quantified results and typical strategic levers discussed in Microsoft’s conventional investor communications.
Key themes typically expected from the QQ3 2025 earnings call (not quoted due to data absence):
- Cloud and AI trajectory: Emphasis on Azure growth, AI-enabled product integrations across Microsoft 365, and Nuance contributions within Intelligent Cloud and Enterprise AI solutions.
- Productivity and Business Processes momentum: Adoption of Office 365, LinkedIn monetization, and security/compliance add-ons driving attachment rates.
- Operating discipline: Margin resilience through software leverage, ongoing cost controls, and selective capex efficiency in hyperscale data centers.
- Execution risk factors: Competitive dynamics in cloud (AWS, Google Cloud), currency effects, and the pace of AI adoption in enterprise settings.
Because the transcript data is unavailable, this section focuses on the numerical strengths and the strategic levers Microsoft typically emphasizes in its communications: cloud leadership, platform profitability, and capital allocation discipline.
Forward Guidance
Inputs for forward-looking analysis are anchored in the QQ3 2025 results and the company’s operating profile, though explicit management-forward guidance is not provided in the dataset. Based on the reported metrics and historical patterns, the following thoughtful outlook applies:
- Revenue growth: Sustained mid-to-high single-digit to low-double-digit growth supported by Intelligent Cloud (Azure) and productivity suite monetization. The reported YoY revenue growth of 13.3% in QQ3 2025 signals continued demand for cloud services and enterprise software.
- Profitability: Operating margin of 45.7% reflects high software leverage. We expect operating leverage to persist as Azure scale effects offset incremental AI and security investments. Net margin (~36.9%) should remain robust absent a sudden shift in mix toward lower-margin offerings.
- Cash flow and capital allocation: The large free cash flow of $20.3B supports continued buybacks and dividends. The company’s liquidity position remains ample with near-term coverage for maturities and ongoing balance-sheet optimization.
- AI and platform bets: Ongoing investment in AI capabilities (infrastructure, developer tooling, and customer-facing AI features) is likely to support long-term growth and margins, but may introduce near-term operating expense pressure before scale benefits materialize.
- Key factors for investors to monitor: Azure growth rate (especially any deceleration or acceleration in cloud demand), productivity suite monetization (subscription growth, AI features), Windows/OEM demand cycles, LinkedIn monetization trends, Nuance/AI integration results, and any changes to capital allocation strategy (buybacks/dividends vs. strategic investments).
Overall assessment: The QQ3 2025 results reinforce Microsoft’s position as a high-quality, cash-generative software and cloud leader. The lack of explicit forward guidance in the data means investors should rely on the strength of cash flow, balance sheet resilience, and the strategic AI-enabled growth narrative to form the investment outlook. Key factors to monitor will be Azure growth persistence, progress in AI-enabled product suites, and the ongoing balance between investment in platform capabilities and shareholder returns.