Microsoft’s first quarter results received a positive response from the market, reflecting robust demand for its cloud and AI offerings. Management attributed the quarter’s outperformance to strong execution in both its cloud infrastructure and business software divisions, as well as better-than-expected performance in its personal computing business. CEO Satya Nadella highlighted continued expansion in Microsoft Cloud, with growth in customer migrations, data analytics tools, and enterprise deals. Chief Financial Officer Amy Hood pointed to early delivery of AI capacity for customers and improved performance in non-AI cloud services as key contributors to the quarter.
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Microsoft (MSFT) Q1 CY2025 Highlights:
- Revenue: $70.07 billion vs analyst estimates of $68.44 billion (2.4% beat)
- Operating Profit (GAAP): $32 billion vs analyst estimates of $30.26 billion (5.7% beat)
- EPS (GAAP): $3.46 vs analyst estimates of $3.22 (7.6% beat)
- Intelligent Cloud Revenue: $0.02 vs analyst estimates of $26.13 billion (2.4% beat)
- Business Software Revenue: $29.94 billion vs analyst estimates of $29.63 billion (1.1% beat)
- Personal Computing Revenue: $13.37 billion vs analyst estimates of $12.64 billion (5.8% beat)
- Gross Margin: 68.7%, down from 70.1% in the same quarter last year
- Operating Margin: 45.7%, up from 44.6% in the same quarter last year
- Market Capitalization: $3.64 trillion
While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.
Our Top 5 Analyst Questions Microsoft’s Q1 Earnings Call
- Keith Weiss (Morgan Stanley) asked about changes in data center strategy and risk of oversupply of GPUs; CEO Satya Nadella and CFO Amy Hood explained the need to match infrastructure buildouts to shifting demand, emphasizing ongoing adjustments for efficiency and regional needs.
- Brent Thill (Jefferies) inquired about accelerating demand for cloud migrations; Nadella described multiple trends, including steady migrations of legacy workloads and robust growth in cloud-native and AI workloads.
- Karl Keirstead (UBS) questioned the drivers behind Azure’s growth, particularly the impact of AI; Hood clarified that non-AI services contributed most to the outperformance, with early delivery of AI capacity providing some additional benefit.
- Kash Rangan (Goldman Sachs) asked about capital efficiency in cloud and AI investments; Hood and Nadella highlighted improvements in hardware and software efficiencies, enabling better returns on infrastructure spending even as investments accelerate.
- Mark Murphy (JPMorgan) sought clarification on how software enhancements affect the useful life of GPU assets; Nadella discussed how advances in software drive efficiency gains, while Hood noted that longer asset lifespans will be considered as more data becomes available.
Catalysts in Upcoming Quarters
In the quarters ahead, the StockStory team will monitor (1) Microsoft’s ability to bring new AI infrastructure online to meet robust demand, (2) ongoing adoption and monetization of AI-powered products such as Copilot and Fabric, and (3) the company’s discipline in managing operating expenses and capital investment. Progress in expanding enterprise AI usage and integrating AI capabilities into core products will also serve as important indicators of Microsoft’s execution.
Microsoft currently trades at $492.25, up from $392.34 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free).
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