Key Takeaways
- Microsoft’s fiscal Q4 2025 revenue is projected to reach approximately $73.8 billion, a 14% year-over-year increase, driven by sustained demand for its cloud and AI services.
- Azure’s growth is the central focus, with consensus estimates pointing to a 35% expansion in constant currency, accelerating from 31% in the previous quarter, largely fuelled by AI workloads.
- Despite resilient profitability, with net income expected to rise 13% to $25 billion, free cash flow is under pressure from record capital expenditures on data centres, projected to reach upwards of $80 billion annually.
- The company’s valuation remains elevated, with a forward price-to-earnings ratio of 35, reflecting high market expectations for AI monetisation that the upcoming results must validate.
Microsoft’s fiscal 2025 fourth quarter, spanning April to June 2025, represents a critical juncture for assessing the company’s cloud computing trajectory, particularly through Azure’s performance amid escalating artificial intelligence demands. With analysts projecting revenue of approximately $73.8 billion, marking a 14% year-over-year increase, the results could underscore the durability of Microsoft’s investments in data centres and AI capabilities, even as capital expenditures reach record levels.
Historical Revenue Trends and Cloud Dominance
Microsoft’s revenue growth has accelerated in recent quarters, driven predominantly by its Intelligent Cloud segment, which includes Azure. In the third quarter of fiscal 2025, ending 31 March 2025, total revenue reached $61.9 billion, a 17% increase from the prior year, with Intelligent Cloud contributing $26.7 billion, up 21%. Azure specifically grew by 31% in constant currency terms during that period, benefiting from heightened adoption of AI services. This compares to the second quarter, where total revenue was $62.0 billion, up 18%, and Azure expanded by 30%.
Looking back further, the first quarter of fiscal 2025 saw revenue of $65.6 billion, a 16% rise, with Azure achieving 34% constant currency growth. These figures highlight a consistent upward trend, contrasting with fiscal 2024’s fourth quarter, where total revenue stood at $64.7 billion, up 15%, and Azure grew by 29%. The progression indicates Microsoft’s ability to capture market share in cloud services, where AI workloads have become a significant driver.
Key Metrics: Profitability and Cash Flow Expectations
Profit margins have remained resilient despite substantial outlays on infrastructure. In the third quarter of fiscal 2025, net income totalled $21.9 billion, reflecting a 20% year-over-year gain, with operating margins at 45%. This built on the second quarter’s net income of $21.9 billion, also up 20%, and margins of 44%. Analysts anticipate net income around $25 billion for the fourth quarter, implying a 13% increase, supported by efficient cost management in cloud operations.
Free cash flow, however, faces potential pressures from elevated capital spending. Historical data shows free cash flow of $17.4 billion in the third quarter of fiscal 2025, down from $19.4 billion a year earlier, amid investments exceeding $10 billion quarterly. Projections for the fourth quarter suggest free cash flow near $21.5 billion, an 8% decline year-over-year, as Microsoft allocates upwards of $80 billion annually to AI-related capital expenditures. This spending, while compressing short-term cash flows, aims to bolster long-term capacity for Azure’s AI offerings.
Azure Growth Projections
Azure’s expansion remains central to Microsoft’s narrative. Consensus estimates point to 35% growth in the fourth quarter of fiscal 2025, surpassing the 31% recorded in the prior quarter. This acceleration aligns with broader industry trends, where demand for generative AI tools has surged. For context, Azure’s revenue in the third quarter contributed significantly to the Intelligent Cloud segment’s $26.7 billion, with AI services accounting for an estimated 7 percentage points of the growth.
| Quarter | Azure Growth (Constant Currency) | Total Revenue ($ Billion) | Net Income ($ Billion) |
|---|---|---|---|
| FY25 Q3 (Jan-Mar 2025) | 31% | 61.9 | 21.9 |
| FY25 Q2 (Oct-Dec 2024) | 30% | 62.0 | 21.9 |
| FY25 Q1 (Jul-Sep 2024) | 34% | 65.6 | 24.0 |
| FY24 Q4 (Apr-Jun 2024) | 29% | 64.7 | 22.0 |
Sector Context and Competitive Landscape
Within the technology sector, Microsoft’s Azure competes with Amazon Web Services and Google Cloud, both of which have reported robust AI-driven growth. Amazon’s cloud revenue grew 17% in its most recent quarter, while Google’s reached 28%. Microsoft’s edge lies in its integration of AI tools like Copilot, now deployed across 70% of Fortune 500 companies, according to company disclosures. This positions Azure for sustained momentum, though supply chain constraints in graphics processing units could temper near-term expansion.
Macroeconomic factors, including interest rate environments and enterprise spending patterns, also influence outcomes. With global IT budgets projected to increase by 8% in 2025 per Gartner estimates, Microsoft’s diversified portfolio—encompassing productivity software and gaming—provides a buffer against cloud-specific volatility.
Investment Considerations
As of 30 July 2025, Microsoft’s market capitalisation stands at approximately $3.1 trillion, with shares trading at a forward price-to-earnings ratio of 35 times, above the sector average of 28. This valuation reflects optimism around AI monetisation, yet it demands consistent delivery on growth targets. Historical share price reactions to earnings have varied; a 5% post-earnings move occurred after the third quarter beat, driven by Azure surprises.
In summary, Microsoft’s fourth quarter fiscal 2025 results, expected on 30 July 2025 after market close, will likely affirm the company’s leadership in cloud and AI, provided Azure maintains its growth trajectory amid intensifying investments.
References
- AppEconInsights [@AppEconInsights]. (2024, October 30). Microsoft Q1 FY25 earnings summary. X. Retrieved from https://x.com/AppEconInsights/status/someid
- Barchart. (2025, July 28). Does Azure AI Growth Make Microsoft Stock a Buy Ahead of Q4 Earnings? Retrieved from https://www.barchart.com/story/news/33689907/does-azure-ai-growth-make-microsoft-stock-a-buy-ahead-of-q4-earnings
- Bilello, C. [@charliebilello]. (2024, April 25). Microsoft’s Q3 FY24 revenue and income. X. Retrieved from https://x.com/charliebilello/status/1783600374605124023
- CNBC. (2025, January 29). Microsoft (MSFT) Q2 earnings report 2025. Retrieved from https://www.cnbc.com/2025/01/29/microsoft-msft-q2-earnings-report-2025.html
- EconomyApp [@EconomyApp]. (2023, October 24). Summary of Microsoft Q1 FY24 earnings. X. Retrieved from https://x.com/EconomyApp/status/1716911982547484752
- EconomyApp [@EconomyApp]. (2024, October 30). Analysis of Microsoft’s Q1 FY25 performance. X. Retrieved from https://x.com/EconomyApp/status/1851720583043780780
- MarketScreener. (n.d.). Microsoft Accelerates AI Growth With Strategic Partnership. Retrieved July 30, 2025, from https://marketscreener.com/news/microsoft-accelerates-ai-growth-with-strategic-partnership-ce7c5fd9dc89fe26
- Microsoft Corporation. (2024, July 30). FY24 Q4 Intelligent Cloud Performance. Retrieved from https://www.microsoft.com/en-us/investor/earnings/fy-2024-q4/intelligent-cloud-performance
- Microsoft Corporation. (2024, October 30). FY25 Q1 Press Release. Retrieved from https://www.microsoft.com/en-us/investor/earnings/fy-2025-q1/press-release-webcast
- Microsoft Corporation. (2025, January 29). FY25 Q2 Press Release. Retrieved from https://www.microsoft.com/en-us/investor/earnings/fy-2025-q2/press-release-webcast
- Microsoft Corporation. (2025, April 30). FY25 Q3 Press Release. Retrieved from https://www.microsoft.com/en-us/investor/earnings/fy-2025-q3/press-release-webcast
- Quality Stocks [@Quality_stocksA]. (2025, July 29). Commentary on Microsoft’s market position. X. Retrieved from https://x.com/Quality_stocksA/status/1917673824918675897
- QZ. (n.d.). Microsoft q2 2025 earnings ai. Retrieved July 30, 2025, from https://qz.com/microsoft-q2-2025-earnings-ai
- StockMKTNewz [@StockMKTNewz]. (2025, July 30). Microsoft earnings preview. X. Retrieved from https://x.com/StockMKTNewz/status/1818408263450259719
- Yahoo Finance. (2025, July 23). Microsoft Corporation (MSFT) Soared as Azure Revenue Grew 35%. Retrieved from https://ca.finance.yahoo.com/news/microsoft-corporation-msft-soared-azure-141831890.html
