- Microsoft (NASDAQ:MSFT) announced its financial results for Q3 of fiscal year 2025, showing growth and surpassing Wall Street expectations
- The software giant reported a revenue of US$70.1 billion and a net income of US$25.8 billion for Q3. This marks a 13 per cent increase in revenue and an 18 per cent rise in net income compared to the same period last year
- Microsoft Cloud revenue reached US$42.4 billion, reflecting a 20 per cent year-over-year increase
- Microsoft stock (NASDAQ:MSFT) last traded at US$395.26
Microsoft (NASDAQ:MSFT) announced its financial results for Q3 of fiscal year 2025, showing growth and surpassing Wall Street expectations. The software giant reported a revenue of US$70.1 billion and a net income of US$25.8 billion for Q3. This marks a 13 per cent increase in revenue and an 18 per cent rise in net income compared to the same period last year. Analysts had anticipated a revenue of US$68.42 billion, making Microsoft’s performance a notable achievement.
Key growth drivers
The primary driver behind Microsoft’s revenue surge is its cloud business. Microsoft Cloud revenue reached US$42.4 billion, reflecting a 20 per cent year-over-year increase. Despite the significant growth in cloud services, Microsoft has not disclosed specific figures for its AI-related revenues, leaving the exact impact of AI on its business somewhat ambiguous.
Windows OEM and devices revenue
Microsoft reported a modest 3 per cent growth in Windows OEM and devices revenue year-over-year. This growth is attributed to businesses and consumers upgrading their PCs and laptops ahead of the Windows 10 end-of-life in October. However, the increase in Windows OEM revenue has been tempered by elevated inventory levels due to tariff uncertainties.
Surface and hardware performance
Microsoft has combined Surface revenue with Windows OEM revenue, making it difficult to assess the performance of its Surface line independently. The company did not launch any new consumer Surface devices in the recent quarter but introduced Intel-powered versions of the Surface Pro 11 and Surface Laptop 7 for businesses in February. Rumors suggest that smaller versions of the Surface Pro and Surface Laptop may be launched soon.
Gaming sector insights
In the gaming sector, Microsoft experienced a 6 per cent decline in Xbox hardware revenue, despite launching various games into Game Pass. Overall gaming revenue increased by 5 per cent, with Xbox content and services, including Game Pass, growing by 8 per cent. Microsoft has not provided updated Game Pass subscriber numbers since February 2024, when it reported 34 million subscribers.
Office and cloud services
Microsoft’s Office and cloud businesses continue to be strong performers. Microsoft 365 commercial products and cloud services revenue grew by 11 per cent year-over-year, while Office consumer revenue increased by 10 per cent. Microsoft 365 consumer subscribers have reached 87.7 million. The company bundled its Office AI features into Microsoft 365 Personal and Family subscriptions earlier this year, raising prices. Existing subscribers can opt out of the AI features to avoid the price increase, though Microsoft has seen growth in revenue per user from the January price hike.
Intelligent cloud growth
Microsoft’s intelligent cloud revenue surged by 21 per cent year-over-year to US$26.8 billion, doubling the revenue generated by Windows, Xbox, and search and news advertising combined. Server products and cloud services revenue increased by 22 per cent, with Azure growth hitting 33 per cent.
Future outlook
Microsoft has been expanding its strategy to bring more previously Xbox-exclusive games to PlayStation and Nintendo Switch. This move has proven successful, with preorders for Indiana Jones and the Great Circle and Forza Horizon 5 topping Sony’s PlayStation Store last month.
The company will probably push even more fans to pick up a Switch or PlayStation controller now that they have raised the prices on their XBox Series consoles and related products.
About Microsoft
Microsoft Corp. develops and supports software, services, devices and solutions. The company’s segments include productivity and business processes, intelligent cloud and more personal computing.
Microsoft stock (NASDAQ:MSFT) last traded at US$395.26 and rose 5.94 per cent in April, though it has shed 0.65 of a per cent since May 2024.
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(Top photo: File.)