The Tool Desk
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The headline numbers
Microsoft’s GAAP results show strong sales and operating-profit growth, although net income and earnings per share increased more slowly than revenue.
| Measure | Q2 FY2025 | Q2 FY2024 | Year over year |
|---|---|---|---|
| Revenue | $69.632 billion | $62.020 billion | 12% |
| Operating income | $31.653 billion | $27.032 billion | 17% |
| Net income | $24.108 billion | $21.870 billion | 10% |
| Diluted earnings per share | $3.23 | $2.93 | 10% |
The commonly reported $69.6 billion is simply a rounded presentation of Microsoft’s $69.632 billion result. The 12% comparison is year over year, not sequential growth. Figures are from Microsoft’s FY25 Q2 earnings release.
Cloud and AI supplied the central growth engine
Microsoft Cloud revenue reached $40.9 billion, up 21% year over year. Within the Intelligent Cloud segment, Azure and other cloud services revenue increased 31%. Microsoft does not disclose a standalone Azure dollar total in this release, so the $40.9 billion Microsoft Cloud figure should not be treated as Azure revenue: Microsoft Cloud is a broader grouping that includes multiple server, enterprise, productivity and other cloud businesses.
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Microsoft said its AI business had passed a $13 billion annual revenue run rate, up 175% year over year. A run rate annualizes the current pace of business; it is not $13 billion of revenue recognized during this quarter and is not a separately reported GAAP segment. AI-related activity spans Azure infrastructure and services, Azure OpenAI workloads, Microsoft 365 Copilot, developer and data platforms, security and business applications. The release does not quantify each contribution or establish AI-specific margins, profitability or return on data-center investment.
How Microsoft’s three segments performed
| Segment | Q2 FY2025 revenue | Year-over-year change | Key drivers |
|---|---|---|---|
| Productivity and Business Processes | $29.437 billion | 14% | Microsoft 365, LinkedIn and Dynamics |
| Intelligent Cloud | $25.544 billion | 19% | Server products, Azure and other cloud services |
| More Personal Computing | $14.651 billion | Approximately flat | Windows, Xbox, devices, search and news advertising |
Productivity and Business Processes
- Microsoft 365 Commercial products and cloud services revenue increased 15%; commercial cloud revenue rose 16%.
- Dynamics products and cloud services increased 15%, with Dynamics 365 revenue up 19%.
- LinkedIn revenue increased 9%.
- Microsoft 365 Consumer products and cloud services revenue increased 8%. Thurrott reported 86.3 million consumer subscribers, up 10%, in its coverage of the quarter: Thurrott’s January 29, 2025 report.
This segment was Microsoft’s largest by revenue, reflecting the scale of recurring commercial subscriptions and cloud-delivered applications.
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Intelligent Cloud
- Server products and cloud services revenue increased 21%.
- Azure and other cloud services revenue increased 31%.
That combination makes enterprise cloud consumption the clearest numerical link between Microsoft’s infrastructure investments and quarterly sales, while still leaving the profitability of individual AI workloads undisclosed.
More Personal Computing
- Windows OEM and Devices revenue increased 4%.
- Xbox content and services revenue increased 2%.
- Search and news advertising, excluding traffic acquisition costs, increased 21%.
The segment was essentially unchanged overall. Thurrott additionally reported that total gaming revenue fell 7% and Xbox hardware revenue fell 29%; those figures distinguish broader gaming and hardware performance from the official Xbox content-and-services figure.
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Was the growth broad-based?
No. Productivity and Business Processes and Intelligent Cloud together produced the overwhelming share of expansion, while More Personal Computing was flat. The mix shows a shift toward commercial cloud and subscription revenue, which is generally more recurring, alongside weaker exposure to PC, console and device cycles. It does not mean every Microsoft consumer business declined: advertising, Windows OEM and Xbox content and services all grew, but not enough to lift the segment materially.
Currency was not the main explanation
Microsoft reported companywide revenue growth of 12% on both a GAAP and constant-currency basis. Its segment reconciliations were similarly close:
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| Segment | GAAP growth | Constant-currency growth |
|---|---|---|
| Productivity and Business Processes | 14% | 13% |
| Intelligent Cloud | 19% | 19% |
| More Personal Computing | 0% | 0% |
Those figures indicate that foreign-exchange movements were not the central reason for the headline increase.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Profitability and investment questions
Operating income grew 17%, faster than revenue, to $31.653 billion. Net income grew 10%, to $24.108 billion, and diluted EPS rose 10% to $3.23. Gross margin increased from $42.397 billion to $47.833 billion, while research and development expense rose from $7.142 billion to $7.917 billion. The earnings release does not by itself provide a complete explanation for why operating-income and net-income growth differed, so no single cause should be assigned without additional filing or earnings-call analysis.
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- Power that lasts all day – With 20 hours of battery life[3], the new Surface Laptop powers through your entire day, so you can create, work and stream from morning to night without reaching for a charger.
- 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.
The figures demonstrate commercial demand for cloud and AI services, but they do not prove AI profitability, AI gross margin, the return on data-center spending or that all capital expenditure was devoted to AI infrastructure. AI revenue, investment and economics remain separate questions.
What investors should watch
- Azure growth: whether the 31% rate accelerates or decelerates in later quarters, using comparable reported or constant-currency measures.
- AI monetization: whether the stated run rate becomes durable recognized revenue across Azure, Microsoft 365 and business applications.
- Capacity returns: whether infrastructure spending generates adequate revenue and operating profit as Microsoft expands AI capacity.
- Consumer businesses: whether flat personal-computing revenue and reported gaming and hardware pressure persist.
- Profit mix: whether Microsoft can maintain operating leverage while funding elevated research, cloud and AI investment.
Bottom line
FY25 Q2 was a strong cloud-and-enterprise quarter, not a uniformly strong result across Microsoft’s portfolio. The $69.6 billion headline was supported by 31% growth in Azure and other cloud services, 21% growth in Microsoft Cloud and a rapidly rising AI run rate. At the same time, More Personal Computing was flat, and the AI figure was an annualized business pace rather than a separately reported quarterly revenue line.
Quick Recap
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