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.