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Microsoft reported $69.632 billion in revenue for the quarter ended December 31, 2024, up 12% from a year earlier. The company announced the results on January 29, 2025. This was Microsoft’s second quarter of fiscal 2025—covering October through December 2024—not calendar Q2 2025.
The quarter was strong on total-company revenue and profit, but investors focused on whether Azure growth was fast enough to justify Microsoft’s heavy artificial-intelligence infrastructure spending. Azure and other cloud services grew 31%, below some analyst expectations, and Microsoft shares fell about 5% in after-hours trading.
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Microsoft’s fiscal Q2 2025 results at a glance
| Metric | Q2 FY2025 | Year-over-year change |
|---|---|---|
| Revenue | $69.632 billion | +12% |
| Net income | $24.108 billion | +10% |
| Diluted GAAP earnings per share | $3.23 | +10% |
| Operating income | About $31.653 billion | +17% |
| Microsoft Cloud revenue | $40.9 billion | +21% |
| Azure and other cloud services growth | 31% | Reported growth rate |
| Dividends and share repurchases | $9.7 billion | Returned during the quarter |
Microsoft’s fiscal year starts July 1, so fiscal Q2 2025 ran from October 1 through December 31, 2024. The figures above are GAAP results unless otherwise identified. Microsoft’s official release and quarterly filing provide the underlying statements and segment disclosures: Microsoft’s Q2 FY2025 earnings release and Form 10-Q.
Was the quarter financially strong?
On an absolute basis, yes. Revenue remained in double-digit growth, while operating income increased faster than revenue, indicating operating leverage. Net income grew more slowly than operating income, so the quarter was not uniformly stronger across every profit measure. Microsoft also returned $9.7 billion through dividends and repurchases.
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That broad strength did not eliminate concerns about the company’s most closely watched growth engine. Azure growth, cloud capacity and the cost of building AI infrastructure shaped how investors interpreted the headline numbers.
Which businesses drove the quarter?
Productivity and Business Processes
This segment includes Microsoft 365 Commercial, Office, LinkedIn and Dynamics. Microsoft 365 Commercial products and cloud services revenue rose 15%. Microsoft 365 Commercial cloud revenue increased 16% in reported currency, or 15% in constant currency. LinkedIn revenue increased about 10%, while Dynamics products and cloud services also contributed to growth.
The segment demonstrates that Microsoft’s expansion is not dependent on Azure alone: recurring enterprise subscriptions and business applications remained important sources of revenue.
Intelligent Cloud
Intelligent Cloud generated approximately $25.5 billion, up 19%. It includes Azure, server products and enterprise services. Azure and other cloud services revenue grew 31%, supported by demand for cloud infrastructure and AI-related services.
The $25.5 billion figure is for the entire Intelligent Cloud segment, not Azure by itself. Microsoft does not disclose a standalone Azure dollar-revenue total in the release.
More Personal Computing
More Personal Computing covers Windows, Devices, gaming, Xbox content and services, and search advertising. It was less central to the investor debate than cloud and Microsoft 365. Gaming comparisons also require care because Microsoft acquired Activision Blizzard during fiscal 2024, changing the year-over-year base. Category-level results should therefore be read from Microsoft’s reported disclosures rather than summarized as uniform growth across all consumer businesses.
Microsoft Cloud, Azure and Intelligent Cloud are different measures
These terms are often blurred, but they answer different questions:
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- Microsoft Cloud: Microsoft’s aggregate of commercial cloud offerings, including Microsoft 365 Commercial cloud, Azure and other components. It generated $40.9 billion, up 21%.
- Azure and other cloud services: A reported growth category; it grew 31%. Microsoft did not provide a complete Azure dollar-revenue figure in the release.
- Intelligent Cloud: A reportable segment containing Azure plus server products and enterprise services. Revenue was approximately $25.5 billion.
Substituting one measure for another can make Azure appear larger or smaller than Microsoft actually reported.
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Azure’s 31% growth was still rapid, but it was below some contemporaneous forecasts of roughly 32%. The Intelligent Cloud segment’s approximately $25.5 billion in revenue was also below the roughly $25.83 billion FactSet estimate cited by the Associated Press. Total revenue and earnings were generally viewed as better than expected, creating a split verdict: Microsoft delivered strong aggregate results, while its key cloud growth metric did not clear every benchmark.
Microsoft said demand for AI services and cloud capacity remained robust, and management discussed large Azure and Microsoft 365 contracts. At the same time, capacity constraints and foreign-exchange movements affected near-term comparisons. Investors were asking not whether AI demand existed, but how quickly demand could become recognized revenue and attractive margins.
AI demand versus AI economics
Microsoft’s AI strategy spans data-center infrastructure, models, developer tools, security, business applications and Copilot products. Azure AI usage contributed to cloud growth, while Microsoft 365 Copilot represented a separate product-monetization opportunity.
Demand is not the same as profit. Microsoft was investing in data centers, servers, networking equipment and energy to expand capacity. Those costs can temporarily reduce Microsoft Cloud gross-margin percentages even while revenue accelerates. A later FY2025 filing confirmed that AI-infrastructure investment affected Microsoft Cloud margins; that is retrospective context, not information available when Q2 was reported. See Microsoft’s FY2025 Form 10-K.
Management’s comments support a case for substantial commercial AI demand, but the quarter did not prove that AI investment had fully paid for itself or that the AI business was independently profitable.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What guidance did Microsoft give?
On the January 29 earnings call, Microsoft said it expected Microsoft 365 Commercial cloud revenue growth of approximately 14% to 15% in constant currency for the following quarter. Management also discussed foreign-exchange pressure, including an estimated roughly $1 billion revenue impact relative to prior assumptions.
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Intelligent Cloud revenue guidance for the following quarter was approximately $25.9 billion to $26.2 billion. These were forward-looking expectations issued with the Q2 results, not later actual results. Management commentary and guidance are available in the Q2 FY2025 earnings call materials.
Why did Microsoft shares fall after strong results?
Associated Press reporting said Microsoft shares declined roughly 5% in after-hours trading. The move reflected the composition of growth rather than proof that the quarter was poor: Azure growth was below some expectations, and investors were weighing the scale of AI spending against future growth and margins.
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Broader technology-market volatility and concern about AI economics were also part of the backdrop, including market disruption associated with DeepSeek. That context should not be treated as evidence that DeepSeek alone caused Microsoft’s move.
Investor takeaway
Microsoft’s fiscal Q2 2025 showed powerful, diversified growth: $69.632 billion of revenue, rising profit, a $40.9 billion Microsoft Cloud business and 31% Azure growth. It was not, however, a clean Azure-acceleration story. The key investment question had shifted from whether AI demand existed to whether Azure growth and AI monetization could justify the scale and cost of Microsoft’s infrastructure spending.
That interpretation is about business performance and expectations, not a buy or sell recommendation. A strong reported quarter can still disappoint a market that expected even faster growth.
Primary sources: Microsoft earnings release, Form 10-Q, earnings call, and Associated Press coverage.
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