Microsoft(MSFT 0.50%) reported fourth-quarter fiscal 2025 earnings on July 29, 2025, delivering $76.4 billion in revenue, up 18% year-over-year in constant currency, and $3.65 in earnings per share, up 22% year over year, both in constant currency.
Strong results were driven by 25% year-over-year growth in Microsoft Cloud revenue (in constant currency), $75 billion in Azure annual revenue, up 34% year-over-year for fiscal 2025 (period ended June 30, 2025), record commercial bookings exceeding $100 billion, up 30% year-over-year for fiscal 2025, and expanding adoption of AI and Copilot products across enterprise and consumer segments.
This summary highlights strategic milestones in cloud, AI monetization, and capital allocation that are crucial for long-term investors.
Azure growth and AI platform scale drive MSFT outperformance
Microsoft Cloud's annual revenue reached $168 billion, up 23% year-over-year, while Azure expanded global infrastructure to more than 400 data centers across 70 regions. Azure’s buildout included more than two gigawatts of new data center capacity, and the company led in liquid cooling capabilities for AI-first workloads.
"Azure surpassed $75 billion in annual revenue, up 34% driven by growth across all workloads. We continue to lead the AI infrastructure wave and took share every quarter this year. We opened new data centers across six continents and now have over 400 data centers across 70 regions, more than any other cloud provider. There is a lot of talk in the industry about building the first gigawatt and multi-gigawatt data centers. We stood up more than two gigawatts of new capacity over the past twelve months alone, and we continue to scale our own data center capacity faster than any other competitor. Every Azure region is now AI-first. All of our regions can now support liquid cooling, increasing the fungibility and the flexibility of our fleet. And we are driving and riding a set of compounding S-curves across silicon systems and models to continuously improve efficiency and performance for our customers."
-- Satya Nadella, Chairman and Chief Executive Officer
Microsoft’s unmatched expansion of hyperscale infrastructure positions it to capture accelerating enterprise and cloud-native migration while securing early leadership in AI-enabled workloads, underpinned by significant cost and efficiency improvements that support long-term margin durability.
AI monetization accelerates with cross-stack product integration
Paid commercial seats for Microsoft 365 rose 6% year-over-year, GitHub Copilot Enterprise customers increased 75% quarter-over-quarter, and Microsoft’s Copilot apps have surpassed 100 million monthly active users, reflecting rapid adoption. Foundry is already used by 80% of the Fortune 500, and Foundry is now used by 14,000 customers to build agents, highlighting cross-industry traction.
"Our family of Copilot apps has surpassed 100 million monthly active users across commercial and consumer. And when you take a broader look at the engagement of AI features across our products, we have over 800 million monthly active users. Microsoft 365 Copilot is becoming the new way to organize, work, and workflow and work artifacts. We rolled out our biggest update to Microsoft 365 Copilot to date this quarter, bringing together chat, search, create notebooks, as well as agents into one intuitive scaffolding. With this innovation and continued product improvements, we are seeing real momentum. Customers continue to adopt Copilot at a faster rate than any other new Microsoft 365 suite with strong usage intensity as shown by our week-over-week retention. And we saw the largest quarter of seat ads since launch with a record number of customers returning to buy more seats."
-- Satya Nadella, Chairman and Chief Executive Officer
Microsoft’s success in embedding and monetizing AI -- spanning Copilot, Foundry, Fabric, and GitHub -- broadens the recurring revenue base and sets the stage for future pricing power and upsell opportunities within both enterprise and consumer cloud ecosystems.
Contracted backlog supports sustained CapEx and margin discipline
Commercial remaining performance obligation (RPO) climbed to $368 billion, up 35% year-over-year, with 35% of commercial remaining performance obligation recognized as revenue within 12 months, up 21% year-over-year. The company achieved a 45% operating margin (up two percentage points year-over-year) for the full fiscal year despite higher capital expenditures, demonstrating operational leverage. Management guided to capital expenditure moderation in fiscal 2026 (period ending June 30, 2026) with a higher mix of short-lived assets, projecting stable operating margins amid ongoing capacity investments in fiscal 2026 and cloud demand outstripping supply.
"We have $368 billion of contracted backlog we need to deliver, not just across Azure, but across the breadth of the Microsoft Cloud. So in terms of feeling good, about the ROI and the growth rates and the correlation I feel very good that the spend that we're making is correlated to basically contracted on the books business. That we need to deliver and we need the teams to execute at their very best to get the capacity in place. As quickly and effectively as they can. And so when you look we've talked about the growth rate declining year over year (as discussed on the Q4 FY2025 earnings call; Microsoft reports on a fiscal year basis). But at its core, our investments, particularly in short-lived assets, like servers, GPUs, CPUs, networking storage, is just really correlated to the backlog we see and the curve of demand."
-- Amy Hood, Chief Financial Officer
Microsoft’s robust contractual backlog provides clear forward revenue visibility, validating the prudence of elevated capital expenditures and reducing the risk of overbuild while supporting capital allocation that maximizes long-term shareholder value.
Looking ahead
Management expects fiscal 2026 to deliver double-digit revenue and operating income growth, driven by sustained demand for cloud and AI offerings and underpinned by a contracted RPO of $368 billion. Capital expenditures for the first quarter of fiscal 2026 are projected to exceed $30 billion, reflecting continued capacity buildout to meet demand, with Azure revenue growth forecast at approximately 37% year-over-year in constant currency for the first quarter of fiscal 2026. Operating margins are expected to remain stable year-over-year for fiscal 2026, and the effective tax rate is expected to rise to 19%-20% for fiscal 2026.
