After an impressive earnings report, Microsoft (MSFT -0.52%) became the world's second $4 trillion company. It did that after the stock jumped about 4% following earnings. The reason why Microsoft jumped is incredible and represents a significant shift in Microsoft's business.
The metric that it revealed to investors on July 30 is nothing short of jaw-dropping, and it's one that investors need to see to believe.
Image source: Getty Images.
Microsoft saw strength from nearly every division in Q4
Microsoft is a tech conglomerate with an incredibly broad product lineup ranging from cloud solutions to software to hardware. Normally, one or even two business segments have rough quarters while cloud services push Microsoft's overall business higher; however, all three performed phenomenally in Microsoft's fiscal fourth quarter of 2025 (ending June 30).
Over the past few years, the weakest division has been its More Personal Computing segment, which houses gaming devices (the Xbox) and other Microsoft-branded hardware. Revenue was up 9% year over year, which is a very strong result historically for this segment.
Productivity and Business Processes houses the Microsoft products you're likely most familiar with, like Office and LinkedIn. This segment crushed it, with revenue rising 16% year over year. That's by far the best quarter this segment has produced during FY 2025, as Q3 revenue growth in this segment was 10%, Q2's was 14%, and Q1's was 12%. If Microsoft's more mature business units can deliver strong growth, it bodes well for the rest of the company, as cloud products once again led the way in Q4.
Azure's growth rate is rapidly accelerating
We still haven't got to the most impressive part of Microsoft's business yet, the Intelligent Cloud division. This segment rose 21% year over year, which is in line with its performance in previous quarters.
However, the star of the show is Azure, Microsoft's cloud computing service. Cloud computing is rising in popularity for a few reasons. First, for traditional business workloads like data processing or information storage, it offers a cost-effective solution. Rather than keep them on expensive company servers that require maintenance or can be expensive to scale up or down, more clients are choosing to offload this work onto the cloud, with Azure being one of the top options.
It's also a smart choice for training and building AI models. Most companies don't need an AI supercomputer at all times. Furthermore, the cost of building one of these units makes it increasingly prohibitive. However, Azure offers high-powered computing necessary for training AI models on the cloud, and this has become an increasingly popular option among many AI start-ups.
Azure's growth rate rapidly accelerated from previous quarters, which is a very bullish sign for Microsoft's business.
| Quarter (Fiscal 2025) | Azure Growth Rate |
|---|---|
| Q1 | 34% |
| Q2 | 31% |
| Q3 | 33% |
| Q4 | 39% |
Data source: Microsoft.
Azure's jaw-dropping 39% year over year growth rate is much quicker than in previous quarters. This strength is expected to persist for some time, and Microsoft's CFO Amy Hood stated that "demand remains higher than supply."
Microsoft Azure is a huge part of the company's investment thesis, and its continued success bodes well for investors. Although Microsoft's stock is expensive, it's still a top operator in the space and makes for a solid AI stock pick right now.
