Microsoft's FY25Q3 covers January through March 2025.
Microsoft FY2025 Q3 Earnings Summary:
Revenue $70.1B, up 13% year over year, setting a record high for the 4th consecutive quarter; Operating income $32.0B, up 16% year over year, record high for the 9th consecutive quarter; Net income $25.8B, up 18% year over year, record high;
Productivity and Business Processes
Productivity and Business Processes revenue $29.9B, up 10% year over year; Operating income $17.4B, up 15% year over year;
Microsoft 365 revenue ~$23.7B, up 11% year over year; Strong M365 E5 and Copilot demand driving sustained ARPU uplift; Hundreds of thousands of customers now using M365 Copilot, up 3x year over year; Record number of customers purchasing additional seats this quarter; Custom Copilot Studio now used by over 230,000 companies, creating 1 million custom agents this quarter, up 130% sequentially;
LinkedIn revenue $4.3B, up 7% year over year; LinkedIn member growth continues at double digits year over year; Marketing Solutions revenue accelerated for the second consecutive quarter; Talent Solutions continues to be impacted by weak hiring market;
Dynamics revenue $1.9B, up 11% year over year; Dynamics 365 revenue up 16% year over year;
Intelligent Cloud
Intelligent Cloud revenue $26.8B, up 21% year over year; Operating income $11.1B, up 17% year over year;
Azure revenue was approximately $19.5B, up 33% year over year. Both Azure AI and non-AI revenue exceeded expectations this quarter, with non-AI exceeding by a larger margin, mainly because cloud migration continues to accelerate: traditional migration, database usage growth, and cloud-native application growth. AI contributed 16 percentage points ($2.3B) to Azure growth. Going forward, distinguishing AI from non-AI workloads will become more difficult. The lead time from GPU receipt to readiness was cut by nearly 20%; AI performance per watt in mixed compute clusters improved nearly 30%; cost per token fell by more than half. AI demand grew faster than expected this quarter, and AI compute supply shortages will persist after June (originally expected to balance after June). Azure AI Foundry processed over 100 trillion tokens this quarter, up 5x year over year, with a single-month record of 50 trillion tokens. SLMs represented by Phi have been downloaded over 38M times cumulatively.
PostgreSQL usage accelerated for the third consecutive quarter, now used by nearly 60% of Fortune 500 companies; Cosmos DB revenue growth accelerated again this quarter; it remains the database of choice for globally distributed NoSQL workloads; Fabric paid customers >21K (19K last quarter), up 80% year over year; Over 50% of Fabric customers use 3+ workloads; Data volume in multi-cloud data lake OneLake grew 6x+ over the past year+; GitHub Copilot users >15M, up >4x year over year;
Visual Studio and VS Code MAU >50M; Low-code Power Platform MAU 56M, up 27% year over year; Security customers >1.4M, of which >900K use 4+ workloads, up 21% year over year; Entra identity MAU >900M;
More Personal Computing
More Personal Computing revenue $13.4B, up 6% year over year; Operating income $3.5B, up 21% year over year;
Windows & Devices revenue $4.1B, up 3% year over year; With Windows 10 end-of-service approaching, Windows 11 commercial deployments grew nearly 75% year over year this quarter;
Gaming revenue $5.7B, up 4% year over year; Xbox hardware revenue down 6% year over year; content and services revenue up 8% year over year; Gaming MAU >500M; PC Game Pass revenue up 45%+ year over year; Xbox Play Anywhere library >1,000 titles; Xbox Cloud Gaming hours played hit a new high, >150M hours this quarter;
Search and news advertising revenue $3.5B, up 21% year over year; Edge and Bing share continue to gain; Total advertising revenue >$20B over the past 12 months;
Earnings Call Highlights
Azure and Microsoft 365 large deal growth drove commitment growth; Commercial RPO $315B, up 34% year over year; annuity mix 98%;
Guiding FY25 Q4 revenue up 15% year over year; operating income up 17% year over year; Azure up 34%-35% year over year; M365 commercial cloud up 14%, consumer cloud up mid-teens; LinkedIn up high single digits; Dynamics 365 up mid-to-high teens; Windows OEM & Devices down mid-to-high single digits; Search advertising up high teens; Gaming revenue up mid-single digits;
Expecting over half of cloud and AI capex to support long-lived assets monetized over 15+ years, with the remainder procuring servers just-in-time based on customer demand; Guiding next quarter capex up sequentially; FY25 H2 overall capex guidance unchanged;
Overall, this earnings release again highlights the resilience of Microsoft's business model, especially as the macro economy begins to turn down.
Microsoft's SaaS portfolio Copilot integration is progressing well, continuously lifting ARPU; Compute resources freed up after 'decoupling' from OpenAI are accelerating Azure monetization.