Executive Summary
Microsoft reported solid QQ2 2025 results with strong top-line growth, resilient profitability and robust cash generation that support a sustained capital return program. Revenue reached $69.632 billion for the quarter, up 12.27% year over year and 6.17% quarter over quarter, while gross profit rose to $47.833 billion and gross margin held at approximately 68.69%. Operating income was $31.653 billion (operating margin ~45.46%), yielding net income of $24.108 billion and earnings per diluted share of $3.23-$3.24. The result reflects continued demand for cloud services and productivity software, underpinned by AI-enabled solutions and a durable enterprise IT spend cycle.
The company continued to generate robust operating cash flow and free cash flow, with net cash provided by operating activities of $22.291 billion and free cash flow of $6.487 billion. Microsoft redeemed nearly $4.986 billion of its stock and paid $6.17 billion in dividends during the quarter, while financing activities remained negative largely due to ongoing share repurchases and dividend distributions. The balance sheet remains highly liquid, with cash and short-term investments totaling about $71.6 billion against roughly $62.2 billion of gross debt, indicating a strong net cash position underpinned by high-quality, recurring revenue streams. Despite an elevated valuation, Microsoft’s balance sheet health and earnings power provide a constructive long-term investment thesis, supported by cloud leadership, AI enablement across its platforms, and a favorable mix shift toward higher-margin Intelligent Cloud products.
Looking ahead, management did not publish explicit numeric guidance in the QQ2 2025 release, but commentary and industry momentum point to continued strength in cloud migration, AI-enabled offerings, and productivity solutions. Investors should monitor Azure growth and utilization, gross and operating margins as mix remains favorable to higher-margin cloud services, ongoing capital allocation (buybacks and dividends), and the pace of AI-driven product adoption across LinkedIn, GitHub, Nuance, and the broader Microsoft ecosystem.
Key Performance Indicators
Key Insights
Revenue: $69.632B in QQ2 2025; YoY growth 12.27%, QoQ growth 6.17% (per reported metrics). Gross Profit: $47.833B; Gross Margin: 68.69%; YoY gross profit growth 12.82%, QoQ 5.16%. Operating Income: $31.653B; Operating Margin: 45.46%; YoY 17.09% growth, QoQ 3.60%. Net Income: $24.108B; Net Margin: 34.62%; YoY 10.23% growth, QoQ -2.27%. Earnings per Share (EPS): $3.24 (diluted $3.23); YoY 10.20% growth, QoQ -2.41%. D&A: $6.827B; EBITDA: $36.786B; EBITDARatio: 52.83%. Cash Flow: Operating cash ...
Financial Highlights
Revenue: $69.632B in QQ2 2025; YoY growth 12.27%, QoQ growth 6.17% (per reported metrics). Gross Profit: $47.833B; Gross Margin: 68.69%; YoY gross profit growth 12.82%, QoQ 5.16%. Operating Income: $31.653B; Operating Margin: 45.46%; YoY 17.09% growth, QoQ 3.60%. Net Income: $24.108B; Net Margin: 34.62%; YoY 10.23% growth, QoQ -2.27%. Earnings per Share (EPS): $3.24 (diluted $3.23); YoY 10.20% growth, QoQ -2.41%. D&A: $6.827B; EBITDA: $36.786B; EBITDARatio: 52.83%. Cash Flow: Operating cash flow $22.291B; Free cash flow $6.487B. Balance Sheet: Total assets $533.898B; Cash and cash equivalents $17.482B; Short-term investments $54.069B; Cash and short-term investments $71.551B; Total debt $62.224B; Net debt is inconsistently reported in the data (netDebt listed as $44.742B despite a substantial net cash position suggested by cash/investments vs. debt). Dividend payout: $6.17B; Common stock repurchased: $4.986B. Payout ratio (historic): ~25.6%. Valuation context: Price/Earnings ~32.5x; Price to Book ~10.35x; Price to Sales ~45.01x; Dividend yield ~0.20% (based on provided data). Cash Conversion Cycle: -27.30 days; ROE ~7.96%; ROA ~4.52%; Asset Turnover ~0.13; Equity Multiplier ~1.76.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
69.63B |
12.27% |
6.17% |
| Gross Profit |
47.83B |
12.82% |
5.16% |
| Operating Income |
31.65B |
17.09% |
3.60% |
| Net Income |
24.11B |
10.23% |
-2.27% |
| EPS |
3.24 |
10.20% |
-2.41% |
Key Financial Ratios
operatingProfitMargin
45.5%
operatingCashFlowPerShare
$3
freeCashFlowPerShare
$0.87
dividendPayoutRatio
25.6%
Management Commentary
Note: The earnings transcript data is not provided in the input. Therefore, no direct management quotes can be extracted from the QQ2 2025 call. Based on the company’s press release and the quarterly results, the key themes typically addressed by management would include: – Strategy and capital allocation: emphasis on AI-enabled cloud and productivity platforms, ongoing share repurchases, and a disciplined approach to operating expenses. – Operations and product cadence: Azure growth and mix shift to higher-margin Intelligent Cloud, continued investments in GitHub, Nuance, and security offerings, and optimization of OPEX to sustain margin expansion. – Market conditions: enterprise IT budgets remains healthy with a focus on digital transformation and hybrid work enablement. – Risk and resilience: competitive pressure in cloud (AWS, Google Cloud), cybersecurity considerations, and macro volatility affecting enterprise IT cycles. If/when transcript data is supplied, this section would be expanded with quotes grouped by themes such as strategy, operations, market conditions, and guidance.
Forward Guidance
No explicit numeric forward guidance was provided in the QQ2 2025 data. Nevertheless, the qualitative guidance and industry context suggest a constructive trajectory: – Revenue growth supported by Intelligent Cloud (Azure, GitHub, Nuance) and Productivity & Business Processes. The YoY revenue growth of 12.3% and a healthy QoQ growth of 6.2% underscore robust demand for Microsoft’s cloud and software offerings. – Margin profile should remain favorable as mix shifts toward higher-margin cloud services and sustainable cost discipline contributes to operating margin in the mid-40s. – Free cash flow generation remains strong, enabling continued generous capital returns (dividends and buybacks) while sustaining a robust balance sheet. Investors should monitor: Azure/Cloud growth rates and utilization; AI product adoption across Microsoft 365, LinkedIn, GitHub, and Nuance; gross and operating margins by segment; and the cadence of capital allocation (buybacks and dividends) in light of ongoing strategic investments.