Microsoft’s Cloud Business Skyrockets—Leaving Legacy Tech in the Dust

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2025-07-30 16:54:34

Microsoft Sees Cloud Growth Accelerate

Redmond's cash cow just got fatter. Microsoft's cloud division—already a Wall Street darling—is accelerating like an AI-powered rocket ship while on-premise dinosaurs scramble to adapt.

Azure's growth engine hits overdrive

No numbers? No problem. When the world's second-most-valuable company says 'accelerate,' hedge funds hear 'ka-ching.' The cloud wars just entered hyperspace—and Satya Nadella's holding the throttle.

Meanwhile in traditional IT land...

Those seven-figure Oracle contracts aren't looking so smart now, are they? Another quarter, another nail in the coffin for 'but our data center is fine' denialists. The future's so cloudy, even bankers can see it (though they'll still charge you 2% to explain it).

Key Metrics

Metric Q4 FY24 Q4 FY25 Change vs. Expectations

Revenue	$64.7 billion	$76.4 billion	18%	Beat
Earnings per share	$2.95	$3.65	24%	Beat
Intelligent Cloud revenue	$23.8 billion	$29.9 billion	26%	n/a
Net cash from operations	$37.2 billion	$42.6 billion	15%	n/a

Microsoft Quantifies Cloud Impact

Microsoft easily topped expectations in its fiscal fourth quarter, reporting revenue up 18% and earnings per share up 24% year over year. Intelligent Cloud continued to lead the way, up 26% from a year ago, helping to fuel a 15% boost in net cash from operations to $42.6 billion.

Gross margin for the quarter came in at 69%.

The company also provided a revenue number for its Azure cloud business for the first time, saying that the service surpassed $75 billion in sales for the entire fiscal year. That's up 34% from fiscal 2024.

"Cloud and AI is the driving force of business transformation across every industry and sector," CEO Satya Nadella said in a statement.

Intelligent Cloud was the standout, but Microsoft saw growth across its different sectors. Productivity and business processes revenue was up 16% thanks to Microsoft 365 commercial and consumer products, while More Personal Computing jumped by 9% in part thanks to 13% Xbox content and services growth.

For the full fiscal year, Microsoft grew revenue by 15% and operating income by 17%.

During the quarter, Microsoft returned $9.4 billion to shareholders in the FORM of dividends and share repurchases. The company ended the period with $94.6 billion in cash and short-term investments on its balance sheet.

Immediate Market Reaction

Investors were apparently cheering the results. Microsoft shares jumped 6% in after-market trading following the earnings release but ahead of the company's call with shareholders.

What to Watch

It is the start of a new fiscal year for Microsoft, and investors will be eager to hear forecasts about whether this growth rate can continue into fiscal 2026. Of particular interest will be any guidance on capex spending in the new year as Microsoft continues to invest in AI and data centers.

Microsoft has a well-diversified business with exposure to both the consumer and commercial customers and both large AI models and personal computer growth. While some of those businesses are vulnerable to economic headwinds and the threats of tariffs, the overall strength of the portfolio was evident in these results.

Microsoft and its big-tech rivals are in the early stages of turning their massive investments in cloud and AI into profits, but the results and new details of Azure are a big step in justifying that outsized expenditure. Investors are understandably excited about the company's potential to continue to convert that potential into profits.