Microsoft Corp

Microsoft reported Q3 FY2025 revenue of $70.1B (up 13% YoY) and net income of $25.8B (up 18% YoY), with diluted EPS of $3.46 (up 18%), as Microsoft Cloud revenue increased 20% to $42.4B.

Revenue increased $8.2B or 13% with growth across each of the three segments; management attributed Intelligent Cloud growth to Azure, Productivity and Business Processes growth to Microsoft 365 Commercial cloud, and More Personal Computing growth to Search and news advertising. Gross margin increased $4.8B or 11% but gross margin percentage decreased, which management attributed to Intelligent Cloud, with Microsoft Cloud gross margin percentage decreasing to 69% due to the impact of scaling AI infrastructure. Operating income increased $4.4B or 16% with growth across each segment.

Other expense, net was $(623)M for the three months ended March 31, 2025 versus $(854)M in the prior-year period, and $(3,194)M for the nine months ended March 31, 2025 versus $(971)M in the prior-year period. Management stated that Other, net primarily reflects net recognized losses on equity method investments, including OpenAI. For the nine months, net recognized losses on investments increased primarily due to higher impairments, offset in part by higher gains on equity investments in the current period, and net losses on derivatives increased primarily due to higher losses on equity derivatives in the current period.

Capital expenditures $16.7B (prior $11.0B) (selected cash-flow amount, not necessarily total capital investment).

“Cash from operations increased $12.2 billion to $93.5 billion for the nine months ended March 31, 2025, primarily due to an increase in cash received from customers, offset in part by an increase in cash paid to suppliers and employees and cash used to pay income taxes. Cash used in financing increased $26.7 billion to $40.9 billion for the nine months ended March 31, 2025, primarily due to $9.0 billion in cash used for repayments of debt, net of proceeds in the current period compared to $14.6 billion in proceeds from the issuance of debt, net of repayments in the prior period. Cash used in investing decreased $40.1 billion to $42.0 billion for the nine months ended March 31, 2025, primarily due to a $63.6 billion decrease in cash used for acquisitions of companies, net of cash acquired and divestitures, and purchases of intangible and other assets, offset in part by a $16.9 billion increase in additions to property and equipment and a $7.2 billion decrease in cash from net investment purchases, sales, and maturities.”

— Filing statement

“We expect capital expenditures to increase in coming years to support growth in our cloud offerings and our investments in AI infrastructure and training.”

— Filing statement

Return on equity was 8.0% (prior 8.7%) (period net income / period-end equity, not annualized); return on assets 4.6% (period net income / period-end assets, not annualized).

The filing does not provide quantitative revenue or earnings guidance. Management stated that it expects capital expenditures to increase in coming years to support growth in its cloud offerings and its investments in AI infrastructure and training, and that the investments it is making in cloud and AI infrastructure and devices will continue to increase its operating costs and may decrease its operating margins.

“We expect capital expenditures to increase in coming years to support growth in our cloud offerings and our investments in AI infrastructure and training.”

— Microsoft CorporationVerified in filing

Leverage: Identified debt as of 2025-03-31: reported debt balance of unestablished maturity scope of $39.9B. The concept behind this balance does not establish which maturities it covers. Total debt, net debt and debt-to-equity are therefore not stated.

Liquidity: Cash, cash equivalents, and short-term investments totaled $79.6B as of March 31, 2025 versus $75.5B as of June 30, 2024. Management stated it expects existing cash, cash equivalents, short-term investments, cash flows from operations, and access to capital markets to continue to be sufficient to fund operating activities and cash commitments for investing and financing activities for at least the next 12 months and thereafter for the foreseeable future.

Cash flow: Cash flow — operating $37.0B, investing $-12.7B, financing $-13.0B.

Working capital: Current assets $156.6B vs. current liabilities $114.2B (current ratio 1.37x). Prior reported balance sheet as of 2024-06-30: $159.7B vs. $125.3B (1.27x).