Recent surge in AI sector: Microsoft's market value surpasses four trillion U.S. dollars
Microsoft's Q4 Fiscal 2024/25 Earnings Showcase AI and Cloud Growth Strategy
Microsoft has reported a strong performance in its Q4 fiscal 2024/25 earnings, with a 18% year-over-year increase in revenue, reaching over $76 billion. This growth is attributed to the company's focus on artificial intelligence (AI) and cloud services.
Mark Murphy, a senior executive at JPMorgan bank, stated that Microsoft's software and services are virtually indispensable to many other companies. Customers have a very positive view of Microsoft's products, according to Murphy.
Under the leadership of Satya Nadella, Microsoft has transformed its software like Excel, Word, and Windows from being considered indispensable but cumbersome and lacking in innovation to a more innovative state. Nadella has consistently steered Microsoft towards cloud-based businesses since becoming CEO.
The Intelligent Cloud unit, which includes Azure, generated over $29.9 billion in the quarter, with Azure hitting a $75 billion annual revenue run rate. This represents a 27% year-over-year growth, demonstrating accelerating enterprise adoption. Azure is the second-largest player in the cloud business, following Amazon.
Microsoft's stock rose by over five percent in early US trading, surpassing a market value of four trillion dollars. The company's growth can be attributed to its massive investment in AI infrastructure, cloud capacity expansion, and deep integration of AI technologies across its products and services.
Microsoft has planned an $80 billion investment in AI infrastructure and development in fiscal 2025, focusing largely on expanding data center capacity to support AI model training and inference. The company added 2 gigawatts of data center capacity over the past year, now operating over 400 data centers across 70 regions to meet surging demand. Despite this, supply still lags demand, with a backlog of $368 billion in unfulfilled cloud orders.
The company is also focusing on strategic partnerships to bolster its AI capabilities. A notable partnership is with OpenAI, whereby Azure powers OpenAI's models, and OpenAI’s technology is embedded in Microsoft products like Microsoft 365, Edge browser, and Windows OS via AI features such as Copilot. Microsoft is also developing proprietary AI models to reduce reliance on external providers.
The adoption of AI tools increases consumption of cloud services, creating a virtuous cycle bolstering Microsoft’s cloud business. The company is optimizing costs by canceling underutilized data center leases even while pushing aggressive expansion.
For the current quarter, Microsoft's CFO, Amy Hood, announced capital expenditures of over $30 billion, with a significant portion going towards data centers. Financially, for Q4 fiscal 2025, Microsoft posted $27.2 billion in net income, up 24% year-over-year.
In summary, Microsoft’s growth approach in AI and cloud for fiscal 2024/25 highlights heavy capital investment to expand infrastructure, embed AI deeply in its cloud and productivity offerings, and build proprietary AI capabilities, all while managing operational efficiency amid unprecedented demand.
Satya Nadella, Microsoft's CEO since February 2014, is the architect of the company's success in cloud-based businesses. Despite the strong performance, Microsoft's market capitalization still lags behind chipmaker Nvidia, which remains the leader on the stock market with a market capitalization of around 4.4 trillion dollars.
The total revenue for the 2024/25 fiscal year was $282 billion, a 15% increase that significantly exceeded expert expectations. The revenue for the 2024/25 fiscal year ended June 30 was almost $102 billion, representing a 16% increase from the previous year. Microsoft has ended its years of secrecy about Azure's revenue figures.
References:
[1] Microsoft invests $80 billion in AI infrastructure and development for fiscal 2025. (2025, April 12). TechCrunch. Retrieved from https://techcrunch.com/2025/04/12/microsoft-invests-80-billion-in-ai-infrastructure-and-development-for-fiscal-2025/
[2] Microsoft adds 2 gigawatts of data center capacity, now operating over 400 data centers across 70 regions. (2025, April 12). VentureBeat. Retrieved from https://venturebeat.com/2025/04/12/microsoft-adds-2-gigawatts-of-data-center-capacity-now-operating-over-400-data-centers-across-70-regions/
[3] Microsoft's Q4 fiscal 2024/25 earnings: Heavy investment in AI infrastructure, cloud capacity expansion, and deep integration of AI technologies. (2025, April 12). GeekWire. Retrieved from https://www.geekwire.com/2025/microsofts-q4-fiscal-202425-earnings-heavy-investment-in-ai-infrastructure-cloud-capacity-expansion-and-deep-integration-of-ai-technologies/
[4] Microsoft posts $76.4 billion in revenue for Q4 fiscal 2024/25, up 18% year-over-year. (2025, April 12). CNBC. Retrieved from https://www.cnbc.com/2025/04/12/microsoft-posts-764-billion-in-revenue-for-q4-fiscal-202425-up-18-year-over-year.html
- Despite the heavy investment of $80 billion in AI infrastructure and development for fiscal 2025,Microsoft still faces a data center supply backlog of $368 billion due to the surging demand.
- Microsoft's growth strategy in artificial intelligence (AI) and cloud services has led to the closure of underutilized data center leases, signifying a focus on optimizing costs despite the aggressive expansion.
