Microsoft (NASDAQ:MSFT) Reports Q4 CY2025 Revenue Surpassing Expectations

Microsoft Surpasses Q4 2025 Expectations

Microsoft (NASDAQ: MSFT) delivered impressive fourth-quarter results for calendar year 2025, outperforming analyst forecasts. The company reported revenue of $81.27 billion, marking a 16.7% increase compared to the same period last year. Earnings per share under GAAP reached $5.16, which was 34.1% higher than consensus estimates.

Considering these results, is now a good moment to invest in Microsoft?

Highlights from Microsoft’s Q4 2025 Performance

• Total Revenue: $81.27 billion, exceeding the $80.32 billion estimate by 1.2%
• Operating Income (GAAP): $38.28 billion, 4.5% above the $36.62 billion forecast
• GAAP EPS: $5.16, beating the $3.85 estimate by 34.1% (non-GAAP EPS, excluding OpenAI effects, was $4.14)
• Intelligent Cloud Revenue: $32.92 billion, topping the $32.34 billion estimate by 1.8%, with Azure showing 38% year-over-year growth at constant currency
• Business Software Revenue: $34.12 billion, 2% above the $33.46 billion projection
• Personal Computing Revenue: $14.25 billion, falling short of the $15.77 billion estimate by 9.7%
• Gross Margin: 68%, matching last year’s figure for the same quarter
• Operating Margin: 47.1%, up from 45.5% a year ago
• Free Cash Flow Margin: 7.2%, down from 9.3% in the prior year’s quarter
• Market Value: $3.57 trillion

Examining Microsoft’s Revenue Expansion

Microsoft continues to demonstrate that even the largest tech firms can achieve robust growth. Over the past five years, the company’s annual revenue has nearly doubled from $153.3 billion to $305.5 billion, reflecting a strong compound annual growth rate of 14.8%.

For comparison, other major technology companies such as Amazon, Alphabet, and Apple posted annualized growth rates of 14.1%, 18.1%, and 9.8% respectively during the same timeframe. These comparisons are relevant as investors often evaluate these giants against each other when considering valuations. Given these figures, Microsoft’s current valuation appears compelling.

While long-term growth is crucial, recent advances in artificial intelligence may not be fully captured by a five-year perspective. Notably, Microsoft’s annualized revenue growth over the last two years reached 15.9%, outpacing its five-year average and indicating accelerating demand.

In the latest quarter, Microsoft’s revenue climbed 16.7% year-over-year, surpassing Wall Street’s expectations by 1.2%. Looking forward, analysts anticipate continued momentum, especially as Microsoft’s new AI-driven offerings gain traction in the market.

The 1999 book Gorilla Game accurately predicted the dominance of Microsoft and Apple in the tech sector by identifying early platform leaders. Today, enterprise software companies integrating generative AI are emerging as the new industry leaders.

Intelligent Cloud: Azure and the Future of Cloud Computing

A key question for Microsoft’s future is the extent to which artificial intelligence will drive additional revenue. The Intelligent Cloud segment, which includes Azure and server/database services, stands to benefit most from the AI revolution.

This division now accounts for 39.4% of Microsoft’s total revenue and has grown at a 17.7% annualized rate over the past five years, outpacing the company’s overall growth. However, growth slowed to 11.9% annually over the last two years.

In Q4, Intelligent Cloud revenue increased by 28.8% year-over-year, beating analyst expectations by 1.8%.

Azure is now a close competitor to AWS in terms of market share, with an annualized revenue run rate of about $150 billion—matching AWS and well ahead of Google Cloud’s $60 billion. For Azure to overtake AWS, it will need to accelerate its growth even further.

Summary of Microsoft’s Q4 Results

While Business Services and Intelligent Cloud outperformed, the Personal Computing segment fell short. Even after adjusting for OpenAI’s impact, earnings per share exceeded forecasts. Some investors may have hoped for even stronger results from Intelligent Cloud and Azure, especially given the hype around AI. Overall, however, the quarter showed solid performance in key areas. Following the report, Microsoft’s stock price remained steady at $460.92.

Is Microsoft currently a compelling investment? To answer that, it’s essential to weigh its valuation, business fundamentals, and the latest quarterly developments.