Microsoft celebrates robust cloud and AI earnings, Marks financial success
Microsoft's latest earnings report shows a significant surge in revenue and profits, driven primarily by the company's investment in artificial intelligence (AI).
In the fourth quarter of its 2025 fiscal year, Microsoft's earnings per share stood at $3.65, marking a 24% increase. The tech giant's revenue for the quarter reached $76.4 billion, a notable 18% increase from the previous year. For the full fiscal year, Microsoft's earnings per share were $13.64, up 16%, while its operating income reached $128.5 billion, a 17% increase.
Satya Nadella, Microsoft's CEO, highlighted the company's leadership in the AI infrastructure wave, stating that Microsoft gained market share each quarter in 2025. To capitalise on this growth, Microsoft plans to spend $80 billion in FY25 capital expenditures to build data centers for AI business.
Microsoft monetizes AI as a software service in several ways. The company's cloud platform Azure serves as the backbone for enterprise AI workloads, generating $26.3 billion in revenue in Q2 2025, up 17% year-over-year. Azure AI is sold on a consumption-based model, allowing Microsoft to capture revenue from growing AI adoption in enterprises.
Microsoft 365 Copilot, an AI-infused productivity tool, is another key revenue driver. Primarily monetized through a per-user licensing structure, Microsoft 365 Copilot enhances user productivity across various applications like Word, Excel, Outlook, and GitHub.
Dynamics 365 AI and LinkedIn AI Tools also contribute to Microsoft's AI revenue. AI capabilities embedded in these products automate and optimise business functions, driving incremental revenue per client via subscription fees or licenses.
Premium pricing and margin expansion are other strategies Microsoft employs to capitalise on its AI investments. By embedding AI, Microsoft transitions cloud services from commodity infrastructure to premium, high-margin offerings, thereby expanding operating margins.
Amy Hood, Microsoft's CFO, suggested that the AI monetization approach is similar to other software monetization methods. During the earnings call, Mark Moerdler, a senior analyst at Bernstein Research, asked about monetizing AI as a software service.
Following the earnings report, Microsoft's market capitalization exceeded $4 trillion, making it the second company, after Nvidia, to touch this milestone. Amazon's cloud business, AWS, reported net sales of about $29 billion during Q1, slightly surpassing Azure's quarterly average of approximately $19 billion. Google Cloud, however, has an annual run rate of $50 billion, according to Alphabet's Q2 2025 earnings report.
For the full fiscal year, Microsoft's revenue reached $281.7 billion, a 15% increase. The company reported better-than-expected revenue for its 2025 fiscal year Q4, attributing the growth to its cloud business and AI. Microsoft's net income for the full fiscal year was $101.8 billion, a 16% increase.
In summary, Microsoft's AI monetization as a software service revolves around scaling AI integration into its cloud and productivity platforms and charging accordingly through a mix of subscription and consumption-based pricing. This approach ties most of Microsoft's increasing revenue growth to AI-enhanced products and services, reaffirming AI as a core driver of its software business model and profitability.
- Microsoft's investment in artificial intelligence (AI) extends to cloud data centers, with plans to invest $80 billion in FY25 for AI business.
- Azure, Microsoft's cloud platform, generates revenue from AI-related workloads, with $26.3 billion earned in Q2 2025, a 17% increase year-over-year.
- Microsoft 365 Copilot, an AI-infused productivity tool, monetizes through a per-user licensing structure and contributes to Microsoft's AI revenue.
