Microsoft Corporation
CEO : Mr. Satya Nadella
Quarterly earnings growth(YoY,%)
| Period | Revenue | Operating Income | EPS | Release Date |
|---|---|---|---|---|
| 2025 Q1 | 16.0% YoY | 13.6% | 10.7% | 2024-10-30 |
Amy Hood says,
Financial Performance Overview
- Quarterly revenue reached $65.6 billion, marking a 16% increase, and earnings per share rose by 10% to $3.30.
- Microsoft Cloud revenue grew 22% to $38.9 billion, aligning with company expectations.
- Gross margin percentage decreased 2 points to 69% year-over-year, influenced by scaling AI infrastructure.
- Operating income grew 14%, although operating margins decreased by 1 point to 47% year-over-year.
Key Business Segment Performance
- Productivity and Business Processes revenue was $28.3 billion, increasing by 12%.
- Intelligent Cloud revenue rose 20% to $24.1 billion, with Azure and other cloud services showing a 33% growth.
- More Personal Computing revenue increased by 17% to $13.2 billion, driven notably by a 43% growth in gaming revenue.
Impact of Activision Acquisition
- Activision contributed a net 3-point impact to revenue growth, with a 2-point deduction on operating income growth.
- Earnings per share saw a negative $0.05 impact due to transaction-related costs.
- Segment operating expenses increased by 49%, significantly influenced by the acquisition, leading to a 4% decrease in operating income.
Q2 Outlook and Future Projections
- Q2 revenue in the Intelligent Cloud is projected to be between $25.55 billion and $25.85 billion, a growth of 18% to 20% in constant currency.
- Expected growth in Azure Q2 revenue by 31% to 32% in constant currency.
- More Personal Computing revenue is forecasted to be between $13.85 billion and $14.25 billion, noting declines in OEM and devices.
- Operating expenses are expected to grow about 7% in constant currency, resulting in operating margin expansion.
Long-term Strategic Investments and AI Growth
- The AI business is projected to surpass a $10 billion annual revenue run rate by Q2, showcasing rapid growth only 2.5 years since inception.
- Continued investment in cloud and AI infrastructure to accommodate increasing demand.
- Strategic focus remains on maintaining leadership in the AI platform space while ensuring cost management across teams.
Satya Nadella says,
Microsoft Cloud and AI Business Growth
- Microsoft Cloud revenue reached $38.9 billion, marking a 22% increase.
- The AI business is projected to surpass a $10 billion annual revenue run rate next quarter, becoming the fastest business in company history to achieve this milestone.
- Azure Arc reported over 39,000 customers, representing an 80% year-over-year growth.
- New cloud and AI infrastructure investments announced for Brazil, Italy, Mexico, and Sweden, indicating a strategic geographic expansion.
Infrastructure and AI Advancements
- Introduction of new Cobalt 100 VMs offering up to 50% better price performance than previous generations.
- Microsoft is the first to implement NVIDIA’s Blackwell system with GB200-powered AI servers.
- Azure OpenAI usage more than doubled in six months, with prominent users like GE Aerospace conducting over 500,000 internal queries.
Developer Tools and Microsoft 365 Innovations
- GitHub Copilot enterprise customers grew by 55% quarter-over-quarter.
- Microsoft 365 Copilot adoption doubled quarter-over-quarter, highlighting substantial growth in user engagement.
- Vodafone and UBS deploying Microsoft 365 Copilot to significant employee bases (68,000 for Vodafone).
Dynamics 365 and Industry-specific Solutions
- Copilot active users in CRM and ERP increased over 60% quarter-over-quarter.
- Introduction of 10 out-of-the-box autonomous agents to Dynamics 365 for enhanced customer engagement.
- DAX Copilot documenting over 1.3 million physician-patient encounters monthly, exhibiting faster revenue growth than GitHub Copilot did in its first year.
Consumer Businesses and Gaming
- LinkedIn’s member growth in India and Brazil is accelerating at a double-digit rate.
- Gaming division set new records for monthly active users and Game Pass revenue, with the launch of Black Ops 6 being the biggest Call of Duty release ever.
- Unit sales on PlayStation and Steam rose over 60% year-over-year, indicating strong cross-platform performance.
| Business Segment | Key Metric | Growth/Impact |
|---|---|---|
| Cloud Revenue | $38.9 billion | 22% growth |
| AI Business | Projected $10 billion annual run rate | Fastest to reach milestone |
| GitHub Copilot | 55% customer growth | Quarter-over-quarter |
| Microsoft 365 Copilot | Double user adoption | Quarter-over-quarter |
This report underscores Microsoft’s strategic advancements in AI and cloud infrastructure, alongside significant growth in developer tools and consumer engagement, fostering a highly favorable outlook for the company’s stock movement.
Q & A sessions,
Capital Outlay and Inference Demand
- Investment in training is closely tied to the demand and monetization of inference capabilities.
- There is a need to refresh the technology fleet in alignment with Moore’s Law every year, impacting depreciation schedules and financial forecasting.
- Inference demand will dictate the amount of capital to be invested in training moving forward.
External Constraints and Infrastructure Development
- The company faces short-term constraints related to data centers (DCs) and power availability due to rapid demand increases.
- Expectations are set for supply-demand equilibrium improvements in the second half of the fiscal year, leveraging long-term infrastructure investments.
Partnership and Innovation with OpenAI
- The partnership with OpenAI has led to mutual successes, including infrastructure innovations and product development like GitHub Copilot.
- Microsoft has focused on high-quality revenue from enterprise demands rather than selling raw GPUs, emphasizing the quality of revenue streams.
Revenue Growth and Financial Performance
- The company’s new suite in M365, notably commercial Copilot products, experienced the fastest growth in history towards $10 billion in revenue.
- Significant revenue growth in segments like search, news, and ads, surpassing market expectations.
- AI investments are leveraged across various Microsoft business units, providing synergy benefits.
Future Outlook and Financial Guidance
- Q1 showed a 34% increase in constant currency, slightly above the guided 33%, due to revenue recognition benefits.
- Supply constraints are expected to ease, with AI supply-demand alignment anticipated to improve in the second half of the year.
- Microsoft’s $13 billion investment in OpenAI entails absorbing a percentage of the losses under equity method accounting, influencing financial entries.
| Item | Guidance/Performance |
|---|---|
| Q1 Revenue Growth | 34% in constant currency |
| Expected Deceleration | 1-2 points due to supply pushouts |
| OpenAI Investment | $13 billion |
No bad stock 