Microsoft has released its fiscal Q4 2025 financial results, showing significant growth despite recent layoffs. The company reported $76.4 billion in revenue and a net income of $27.2 billion, marking an 18% and 24% increase, respectively, year-over-year. These strong results come just weeks after the company laid off up to 9,000 employees. As of June 30th, Microsoft reported a full-time workforce of 228,000 people, the same number as the previous year before the recent cuts.
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Cloud Services Remain the Financial Engine
Cloud services were once again the key driver of Microsoft’s impressive quarter. Azure revenue surged by 39% year-over-year, with CEO Satya Nadella revealing that Azure’s total revenue for the fiscal year surpassed $75 billion, an annual increase of 34%. This growth was fueled by strong demand across all cloud workloads, highlighting a major shift as customers increasingly move away from on-premise server products, which saw a 2% revenue decline.
Microsoft’s commitment to AI is also clear, with Nadella noting that all Azure regions are now “AI-first.” CFO Amy Hood announced plans to spend over $30 billion next quarter to scale up AI infrastructure, a spending pace that could exceed $120 billion over the next fiscal year.
Other segments also saw strong cloud growth:
- Microsoft 365 commercial cloud revenue grew by 18%, boosted by Copilot licenses.
- Microsoft 365 consumer cloud revenue increased by 20%, partly due to a price hike in January. The service now has 89 million subscribers, an 8% increase.
- LinkedIn revenue grew by 9%, with “record engagement” reported.
- Search and news advertising revenue was up 21%, benefiting from AI-powered improvements to Bing.
Windows, Gaming, and Hardware Performance
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In the PC market, Windows OEM and devices revenue rose by 3% year-over-year. This was driven by a Windows 11 refresh cycle for desktop PCs and a rebound in the broader PC market, as businesses prepare for the end of Windows 10 support in October. While Microsoft recently launched new Surface devices, CFO Amy Hood expects devices revenue to decline next quarter, along with a mid-to-high single-digit decline in Windows OEM revenue.
Meanwhile, Xbox and gaming revenue delivered a mixed but successful picture. Overall gaming revenue increased by 10% for the quarter and $2 billion for the entire fiscal year. Xbox content and services revenue, which includes Game Pass, grew by 13%. Nadella confirmed that Game Pass annual revenue reached nearly $5 billion for the first time, with Microsoft boasting 500 million monthly active users across its gaming platforms.
Microsoft’s strategy of bringing more of its exclusive games to PlayStation has paid off handsomely. Nadella stated, “We are now the top publisher on both Xbox and PlayStation this quarter,” a claim backed by Circana data showing Microsoft with six of the top 10 best-selling games on PlayStation. This includes popular titles like Indiana Jones and the Great Circle and Forza Horizon 5, which topped the PlayStation Store pre-orders earlier this year.
However, the hardware side of the business struggled, with Xbox hardware revenue down 22% for the quarter and 25% for the fiscal year, “driven by lower volume of consoles sold.” This decline occurred despite a worldwide price increase for Xbox consoles and controllers in May. Looking ahead, Hood projects a mid-single-digit decline for Xbox content and services revenue next quarter, along with a mid-to-high single-digit drop in overall gaming revenue.
