Microsoft makes money from Azure through cloud and AI services customers consume, and from Microsoft 365 through commercial and consumer subscriptions, cloud services, and licensed software. It monetizes AI within those existing channels—not through a separately reported AI revenue line in the cited figures.
Microsoft’s overall revenue model
Microsoft earns revenue by selling cloud-based solutions and services, licensing and supporting software, and offering other products and services. In its FY2025 annual report, the company described revenue as coming from cloud solutions, content and services, software licensing and support, online advertising, and devices. Microsoft reported $281.7 billion in total revenue for fiscal 2025. Microsoft FY2025 annual report
For Azure, Microsoft 365, and AI, the key distinction is how customers pay: Azure revenue includes cloud services consumed by customers, while Microsoft 365 revenue includes recurring subscriptions as well as some licensed products. AI features are incorporated into these offerings, but Microsoft has not provided a standalone AI revenue total in the cited reporting.
How Azure generates revenue
Azure monetization includes cloud and AI consumption-based services: customers pay for services they use, rather than buying only a fixed software license. Microsoft’s reported category, “Azure and other cloud services,” is broader than Azure infrastructure alone. It also includes GitHub cloud services, Nuance Healthcare cloud services, virtual desktop offerings, and other cloud services. Microsoft FY2026 Q1 investor materials
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Microsoft reported more than $75 billion in Azure revenue for fiscal 2025, up 34%. That is an Azure revenue figure, not the broader Microsoft Cloud total. The company later reported 41% growth in Azure and other cloud services revenue in fiscal 2026. These figures describe different periods; the latter growth measure covers the broader “Azure and other cloud services” category. FY2025 annual report · FY2026 Q1 investor materials
How Microsoft 365 generates revenue
Microsoft 365 brings in money from both business and consumer customers. Commercial offerings include recurring cloud subscriptions, while Microsoft also earns revenue from on-premises software licenses. The reported category matters: subscription-only cloud revenue is not the same as a broader total that also includes licensed products.
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Commercial subscriptions and cloud services
Microsoft defines Microsoft 365 Commercial cloud revenue to include subscriptions for Microsoft 365 Commercial, Enterprise Mobility + Security, the cloud portion of Windows Commercial, the per-user portion of Power BI, Exchange, SharePoint, Teams, Microsoft 365 Security and Compliance, and Microsoft 365 Copilot. In fiscal 2025, this cloud revenue grew 15%, while commercial seats grew 6%. The different growth rates show why revenue growth should not be read as simply a count of new users: revenue can also reflect the mix of products and services sold. Microsoft investor materials and metric definitions
Licensed products and the broader commercial total
Microsoft’s FY2025 annual report reported $87.767 billion in revenue from “Microsoft 365 Commercial products and cloud services.” This category includes Microsoft 365 Commercial cloud as well as on-premises Windows Commercial and Office licensed on-premises. It is therefore broader than the subscription-based cloud metric. Microsoft FY2025 annual report
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The annual report separately reported $98.435 billion in “server products and cloud services” revenue for fiscal 2025. That is another defined annual-report category, not a second way to state Azure revenue. Microsoft FY2025 annual report
Consumer subscriptions
For fiscal 2025, Microsoft reported 89 million Microsoft 365 consumer subscribers and 11% growth in Microsoft 365 Consumer cloud revenue. The consumer category also includes on-premises Office licenses and other consumer services; the subscriber count and cloud revenue growth do not disclose a separate AI contribution. Microsoft FY2025 annual report
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How Microsoft monetizes AI
Microsoft earns money from AI through products customers buy or use within Azure and Microsoft 365. Azure’s reported services include cloud and AI consumption-based offerings, while Microsoft 365 Commercial cloud includes Microsoft 365 Copilot subscriptions. These disclosures show AI embedded in existing cloud and productivity revenue channels; they do not establish how much revenue AI contributes on its own. Microsoft investor materials
That distinction matters when interpreting AI-related growth. A customer using an AI service through Azure contributes within the broader Azure and other cloud services category; a business subscribing to Copilot is included in the Microsoft 365 Commercial cloud definition. Microsoft’s cited materials do not break either channel out into a standalone AI revenue figure, so a precise AI revenue total cannot be inferred from these categories.
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- Work at the speed of your ideas – Built with the latest Qualcomm Snapdragon X2 Elite (12 Core) processors, Surface Laptop delivers fast, AI‑accelerated performance—making it the most powerful Surface laptop for everything from multitasking to demanding workloads.
- The ports you need – Charge on-the-go, transfer data fast, or create the ultimate desktop set up with two USB-C / USB4[4] ports.
- Built-in AI Companion – Work smarter, create freely, and communicate with confidence—Copilot[5] on Windows 11 is always there to help.
Microsoft Cloud is not the same as Azure
Microsoft Cloud is a company-defined aggregate that includes Microsoft 365 Commercial cloud, Azure and other cloud services, the commercial portion of LinkedIn, and Dynamics 365. It is useful for gauging the scale of the company’s cloud-oriented business, but it should not be presented as Azure revenue or added to its component categories.
Microsoft reported $168.9 billion in Microsoft Cloud revenue for fiscal 2025, up 23%, and a 69% Microsoft Cloud gross margin for that year. It later reported $214.4 billion in Microsoft Cloud revenue for fiscal 2026. These totals use Microsoft’s aggregate definition, which spans several business and revenue categories. FY2025 annual report · FY2026 investor materials
Microsoft said in its FY2025 annual report that scaling AI infrastructure put pressure on Microsoft Cloud gross margin, partially offset by efficiency gains in Azure. This describes an investment and cost effect; it does not disclose AI revenue or mean all cloud revenue has the same margin. Microsoft FY2025 annual report
How to read Microsoft’s revenue figures
- Check the fiscal year. Microsoft’s FY2025 annual-report figures and FY2026 investor figures refer to different reporting periods; growth rates should be compared only with their stated period and category.
- Check the metric name. Azure and other cloud services, Microsoft 365 Commercial cloud, Microsoft 365 Commercial products and cloud services, and Microsoft Cloud are not interchangeable labels.
- Do not add overlapping categories. Microsoft Cloud is an aggregate whose components are reported across multiple revenue rows, so adding its total to component figures would double-count revenue.
- Do not infer an AI total. AI services and Copilot appear within reported cloud and subscription categories, but the cited disclosures do not isolate their revenue.
Microsoft’s FY2025 annual report provides detailed annual revenue categories, while the FY2026 investor materials provide later-period metrics and definitions. Microsoft notes investor information is unaudited unless otherwise indicated, so the annual report and investor figures should be read with their own reporting context rather than treated as identical measures. FY2025 annual report · FY2026 Q1 investor materials
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