July 31, 2025
Moments ago, in pre-market trading, investors impressed by Microsoft’s earnings, which beat the Value Line estimate by around +7%, have lifted the stock by over +9% to more than $4 trillion. That’s a gain of $345 billion in market capitalization, one of the best pre-market opens we’ve ever seen. There is no question that the bulls are in control of market prices today.
Without the Wall Street spin, here are the facts of today’s earnings report from Microsoft, with contextual information provided by Microsoft:
Quarterly Year-over-Year Comparison (Q4 FY2025 vs. Q4 FY2024)
| Metric | Actual (MSFT Q4 FY2025) | Prior Year (Q4 FY2024) | YoY Change | Value Line Estimate | Anomaly? |
| Revenue | $76.44B | $64.73B | +18% | $73.72B | ✅ Slightly higher actuals (+3.7%) |
| Operating Income | $34.32B | $27.93B | +23% | Not explicitly forecast | — |
| Net Income | $27.23B | $22.04B | +24% | Not explicitly forecast | — |
| EPS (Diluted) | $3.65 | $2.95 | +24% | $3.41 | ✅ Higher by ~7% |
| Dividends Paid | $6.17B (total payout) | $5.57B | +10.8% | $0.83/share | ❌ Match – No anomaly |
| Cash from Ops (Q) | $42.65B | $37.20B | +14.6% | Not explicitly forecast | — |
🧾 Margins & Segment Trends
| Segment | Revenue YoY (Actual) | Value Line Commentary | Notable Trend |
| Productivity & Business Processes | +16% | Expected strong demand | ✅ Aligns closely |
| Intelligent Cloud | +26% | Projected Azure growth +34% | ✅ Actual Azure growth +39% |
| More Personal Computing | +9% | No major surprises forecasted | ✅ In-line performance |
| Microsoft Cloud (total) | +27% | Q4 forecasted growth ~20% | ✅ Outperformed projection |
🔍 Cash Flow & Balance Sheet Observations
- Cash and Equivalents rose from $18.3B to $30.2B YoY (+65%).
- CapEx for Q4 hit $17.08B vs. $13.87B prior year—aggressive investment in infrastructure.
- Shareholder Returns: $9.4B in repurchases and dividends in Q4 alone.
- Free Cash Flow is not explicitly broken out, but implied strong growth in net operating cash.
Noteworthy Anomalies
- EPS Surprise: Actual EPS of $3.65 surpassed Value Line’s $3.41 estimate (+7%), likely due to operating leverage and cloud profitability.
- Revenue Outperformance: $76.44B vs. estimated ~$73.72B (by ~3.7%), driven by better-than-expected Azure growth and advertising revenue.
- Azure Growth Acceleration: Microsoft reported +39% YoY growth, exceeding both Q3 actuals (+33%) and management guidance (+34%).
- CapEx Intensity: Substantial increase in property and equipment suggests a strategic infrastructure buildout likely tied to AI initiatives.
- Working Capital Change: A Jump in cash and investments (+25%) alongside relatively flat liabilities indicates a strengthening liquidity posture.