This ranking evaluates how Fortune 500 companies are deploying AI, and how technology leaders value those investments relative to industry peers.

Fortune AIQ 75

The companies on the Global 500 employ 70.2 million people, and their revenue represents more than one-third of the world’s GDP.

Fortune Global 500

With a combined revenue of $21 trillion and $2.1 trillion in profits, the 2026 Fortune 500 is the definitive list of America's largest companies.

Fortune 500

The 300 companies on this year’s list brought in over $12.5 trillion in revenue for the latest 12 months, with the median revenue figure at $24 billion.

America's Most Innovative Companies

AI is a major force shaping this year’s list—but it’s far from the only story.

World's Most Admired Companies

Fortune AIQ 50

The corporations on our annual list of the world's 500 largest companies combined to generate $41.7 trillion in revenue over the past year.

Almost $20 trillion in revenue—and a record-breaking $1.87 trillion in profits. Introducing the 2025 Fortune 500, the definitive list of the biggest companies in America.

The 300 companies on this year’s list brought in over $12.6 trillion in revenue for the latest 12 months, with the median revenue figure at $22 billion.

Leaders in all industries rely more than ever on Big Tech—and appreciate the giants that deliver, at scale, without drama.

These 50 companies exemplify the innovation, progress, and potential of AI.

AI Innovators 2025-Microsoft

Fortune 50 AI Innovators

The corporations on our annual list posted aggregate revenues of $41 trillion for the second year in a row.

Industries included in the sector are computers, internet services, IT services, semiconductors, and software companies.

Fortune Sector Leaders: Technology

The Fortune 500, in its 70th year in 2024, ranks the biggest U.S. companies by revenue.

The 200 companies on this list are transforming industries from the inside out.

The 26th edition of the list shows how much esteem Big Tech giants command among other business leaders.

WMA 2024-Microsoft

The 25th Fortune World’s Most Admired Companies list suggests that tech giants’ peers respect them as much as ever.

WMAC 2023-Microsoft

The corporations on our annual list of the world’s largest companies delivered a record $41 trillion in aggregate revenues.

G500-2023-Microsoft

The software, cloud services, and gaming giant has become a trailblazer in artificial intelligence. Meanwhile, its productivity apps and services and other products continue to generate huge profits; Microsoft earned $72.7 billion in 2022, second only to Apple among U.S. Fortune 500 companies. 
<ul> 
 	<li>In January 2023, Microsoft announced that it was making a new $10 billion investment in its longtime partner OpenAI, the creator of ChatGPT. Early products emerging from that partnership include an A.I. assistant to Microsoft 365 apps and services, known as Copilot, and its Bing GPT-4 chatbot.</li> 
 	<li>Even as it announced A.I. advances, Microsoft drew criticism for laying off a team that worked on ensuring ethical outcomes for the technology. Microsoft let the team go as part of a 10,000-employee culling in March 2023. Microsoft said at the time that it was just one of the company’s ethics teams, and that its product teams all had staffers now who “are accountable for ensuring we put our A.I. principles into practice.”</li> 
 	<li>In April 2023, the U.K.’s Competition and Markets Authority blocked Microsoft’s $69 billion acquisition of video-game maker Activision Blizzard, a deal first announced in January 2022. Microsoft has appealed the ruling. The company took a step closer to the merger in July 2023 when a U.S. court ruled against the Federal Trade Commission's efforts to block the deal.</li> 
</ul>

The essential guide to a sector that’s now attracting one out of every four startup investment dollars.

AI-Innovators-2023-Microsoft

While OpenAI deserves the credit for having created ChatGPT, it wouldn't have happened without billions of dollars in investment from Microsoft. The tech giant has committed a reported $13 billion to OpenAI so far and it has built one of the world's largest supercomputing clusters to help OpenAI train its ever-larger, more capable AI models. Microsoft’s Bing Chat, a chatbot and search engine, was built with models from OpenAI, and since its debut, users engaged in over a billion chats with the bot and generated more than a billion images with Bing Image Creator, which uses AI to turn user prompts into images. What Bing hasn't done, however, is move the needle on Microsoft's searh business: Bing remains stuck at about 3% of the global search market, compared to Google's 91%. But for Microsoft, the more important wins from generative AI have been in its Cloud business. Here, Microsoft's ability to offer OpenAI's technology to its Azure cloud customers has helped the tech giant turns in sales and profit growth that has beaten Wall Street expectations, with generative AI accounting for about 3% of the growth in Cloud revenues in the quarter ended in September. Microsoft has also been implementing AI across its core business producitivity software products, from PowerPoint to Outlook, as well as adding products like GitHub Copilot, an AI-powered coding assistant.

The 300 companies on this list are transforming industries from the inside out.

Fortune collaborated with the Diligent Institute to rank the most innovative boards of directors among S&P 500.

Modern Board 2023-Microsoft

After reaching the top spot on last year’s Modern Board 25 ranking, Microsoft has taken a steep tumble but still makes an appearance given its commitment to ESG and board expertise. Its movement on the former includes a push to be carbon negative by 2030, remove historical emissions, and build a “planetary computer” to measure, monitor, and model environmental data. The 12-member board, almost all of whom are independent, includes CEO Satya Nadella, who has been with Microsoft since the early ’90s and previously served as executive vice president of Microsoft’s cloud and enterprise group. Other CEO directors include Wells Fargo’s Charles Scharf, Padmasree Warrior of social reading platform Fable Group, and Emma Walmsley of biopharmaceutical company GSK. In April, The U.K.’s antitrust watchdog vetoed Microsoft’s $69 billion bid to acquire gaming company Activision Blizzard. The company plans to appeal, but a remedy will take time.

Fortune Modern Board 25

The companies on this list are mobilizing the creative tools of capitalism to help solve social problems.

CTW 2023-Microsoft

Only 11% of Indians speak English, the language of the country’s government, while only 57% speak Hindi. That leaves hundreds of millions who speak neither of those languages without good access to information about government services. Microsoft is deploying AI to help: In May, it partnered with local research lab AI4Bharat to create Jugalbandi, a chatbot that combines text-to-speech, translation, and generative AI to give rural Indians access to public services, like university scholarship applications or financial assistance programs, in their own language. The service, which people communicate with through WhatsApp, uses GPT models housed on Microsoft’s Azure OpenAI Service to process questions and uncover information. Jugalbandi is just one way Microsoft hopes to use AI to tackle India’s social issues—and what works in India, with all its complexity, could work globally as well.

Change the World

The Fortune 500, in its 69th year in 2023, ranks the biggest U.S. companies by revenue.

F500 2023-Microsoft

The software, cloud services, and gaming giant has become a trailblazer in artificial intelligence. Meanwhile, its productivity apps and services and other products continue to generate huge profits; Microsoft earned $72.7 billion in 2022, second only to Apple on the Fortune 500. 
<ul> 
 	<li>In January 2023, Microsoft announced that it was making a new $10 billion investment in its longtime partner OpenAI, the creator of ChatGPT. Early products emerging from that partnership include an A.I. assistant to Microsoft 365 apps and services, known as Copilot, and its Bing GPT-4 chatbot.</li> 
 	<li>Even as it announced A.I. advances, Microsoft drew criticism for laying off a team that worked on ensuring ethical outcomes for the technology. Microsoft let the team go as part of a 10,000-employee culling in March 2023. Microsoft said at the time that it was just one of the company’s ethics teams, and that its product teams all had staffers now who “are accountable for ensuring we put our A.I. principles into practice.”</li> 
 	<li>In April 2023, the U.K.’s Competition and Markets Authority blocked Microsoft’s $69 billion acquisition of video-game maker Activision Blizzard, a deal first announced in January 2022. Microsoft has appealed the ruling.</li> 
</ul>

Just as it dominates our economy, Big Tech now dominates Fortune’s annual ranking of corporate reputation.

WMAC-2022-03-Microsoft

Aggregate sales hit $37.8 trillion last year—an increase of 19%, the highest annual growth rate in the list’s history.

G500 2022-33-Microsoft

Microsoft posted a robust 38% increase in profits last year—earning $61 billion as revenue rose 17.5% to $168 billion. But it wasn’t all smooth sailing. The company’s hardware teams coped with a global chip crisis that led to a shortage of Xbox game consoles, but reveled in successes with the release of new Surface laptops and tablet devices. Its software divisions took some lumps, including a disappointing release of Windows 11 (fewer than 1% of 10 million PCs surveyed by IT firm Lansweeper upgraded to the new system) and an early 2021 cybersecurity attack involving Microsoft’s Exchange email software that affected tens of thousands of customers. On the geopolitical front, Microsoft pulled its LinkedIn social platform from China in October 2021 after facing increased content restrictions from the government. In March 2021, the company unveiled its virtual reality platform Microsoft Mesh; it later won a $22 billion contract to supply U.S. Army combat troops with augmented reality headsets. Microsoft took its place in the stock market record books in June 2021, when it became only the second company in U.S. history, after Apple, to reach a $2 trillion market valuation.

Modern Boards 2022 Microsoft

Microsoft has been one of the top-performing companies in tech (or in any sector) for several years running. It also earns the top spot on our inaugural Modern Board 25, thanks to high marks in gender equality, board independence, board expertise, and ESG. <a href="https://news.microsoft.com/leadership/?section=board-members">Eight of its 12 board members</a> and three out of four committee chairs represent gender or ethnic diversity, which studies have shown correlates with stronger company performance and a greater ability to handle emerging business challenges.  
 
Microsoft’s lead independent director is John W. Thompson, former CEO of Virtual Instruments and Symantec, and one of the most prominent Black executives in tech. After joining the board in 2012, Thompson succeeded Microsoft founder Bill Gates as chairman in 2014 and held that role until 2021. Gates left Microsoft’s board in March 2020.  
 
Reid Hoffman, angel investor and cofounder of LinkedIn, joined the board in 2017 after Microsoft bought his company for $26 billion in 2016. Microsoft’s board also boasts former U.S. secretary of commerce Penny Pritzker, and the former worldwide chairman for Johnson &amp; Johnson, Sandra Peterson. The current CEOs of GlaxoSmithKline, ADP, and Wells Fargo are also directors. Padmasree Warrior, former CTO of Cisco, and two CFOs round out the group, along with CEO Satya Nadella, who was named chairman in 2021. 
 
Some governance experts consider having the CEO serve as board chairman to be suboptimal, but as Thompson explained in a <a href="https://www.cnbc.com/2021/07/07/microsoft-lead-director-ceo-satya-nadella-earned-right-to-be-chair.html">recent interview</a>, Nadella has earned the role of chairman because of the company’s exceptional performance under his watch; since Nadella became CEO in 2014, the company has seen major growth in cloud services and video gaming while remaining dominant in productivity software. Microsoft is one of only a handful of U.S. companies to have exceeded a $1 trillion market capitalization; after briefly dipping below $150 at the beginning of the COVID-19 outbreak in North America, its share price has been over $300 for most of 2022.   
 
Microsoft made headlines in early 2022 with its proposed acquisition of Activision Blizzard, a gaming company embroiled in numerous scandals involving its allegedly toxic work environment. Microsoft’s board and C-suite leaders will face a major challenge as they seek to reshape the acquired company’s culture.

This year’s Fortune 500 marks the 68th running of the list.

F500 2022 Microsoft

Microsoft posted a robust 38% increase in profits last year—earning $61 billion, the fourth-largest sum among Fortune 500 companies—as revenue rose 17.5% to $168 billion. But it wasn’t all smooth sailing. The company’s hardware teams coped with a global chip crisis that led to a shortage of Xbox game consoles, but reveled in successes with the release of new Surface laptops and tablet devices. Its software divisions took some lumps, including a disappointing release of Windows 11 (fewer than 1% of 10 million PCs surveyed by IT firm Lansweeper upgraded to the new system) and an early 2021 cybersecurity attack involving Microsoft’s Exchange email software that affected tens of thousands of customers. On the geopolitical front, Microsoft pulled its LinkedIn social platform from China in October 2021 after facing increased content restrictions from the government. In March 2021, the company unveiled its virtual reality platform Microsoft Mesh; it later won a $22 billion contract to supply U.S. Army combat troops with augmented reality headsets. Microsoft took its place in the stock-market record books in June 2021, when it became only the second company in U.S. history, after Apple, to reach a $2 trillion market valuation.

After a year in which humanity leaned more heavily than ever on tech giants, see which companies topped Fortune's ranking of corporate reputation.

WMAC-2021-03-Microsoft

Total revenue for the world’s biggest companies fell 4.8% to $31.7 trillion this year—the first decline in half a decade.

G500-2021-033-Microsoft

While many Big Tech companies faced withering criticism last year for their behavior, Microsoft largely escaped scrutiny. That may be because CEO Satya Nadella has built a collection of complementary parts that perform exceptionally without being the dominant player in any new market. Microsoft’s Azure cloud service, part of the cloud business that increased revenue 34% in the calendar fourth quarter of 2020, trails Amazon. And even as it lags Sony in gaming, Microsoft’s gaming unit saw revenue jump 51% in the holiday quarter with the release of the new Xbox Series X and S. Microsoft still leads its category with the old Windows PC software business, but its PC hardware sales rank outside the top five, and in mobile phones Microsoft is just another app developer. All of this meant that Microsoft was left out of the U.S. House antitrust subcommittee's 450-page report that targeted Apple, Amazon, Facebook, and Google. Sure, there was a complaint in Europe by Slack, alleging that Microsoft had unfairly helped its Teams app. But no one’s seeking to break up the tech giant or undo its acquisitions—at least not for the moment.

This year’s Fortune 500 marks the 67th running of the list.

F500-2021-15-Microsoft

For an astounding 13th straight year, Apple claims the top spot in Fortune’s annual ranking of corporate reputation, based on a survey of almost 3,800 executives, directors, and analysts.

This year's Fortune Global 500 generated $33.3 trillion in revenues and $2.1 trillion in profits.

G500-2020-047-Microsoft

Microsoft jumps 13 spots on this year's Global 500. In the company's fiscal 2019, overall sales soared 14% year-over-year, to $125.8 billion, and the Redmond, Wash., giant churned out $39 billion in profits to boot. Last fall, Microsoft won a coveted cloud-computing contract with the Pentagon worth up to $10 billion, a deal that would help solidify the company's reputation as a leading cloud vendor. (That deal is on hold and under review, however, after rival bidder Amazon raised questions about the bidding process.) So far in 2020, a surge in remote working, as a result of the coronavirus pandemic, has led to even greater demand for the company’s Azure cloud service and its Office 365 workplace apps.

This year's Fortune 500 marks the 66th running of the list.

F500-2020-021-Microsoft

Microsoft reached its highest ranking ever on the Fortune 500, up five spots from last year, and churned out $39 billion in profits to boot. In Microsoft’s fiscal 2019, overall sales soared 14% year-over-year, to $125.8 billion. Last fall, the software titan won a coveted cloud-computing contract with the Pentagon worth up to $10 billion, a deal that would help solidify Microsoft’s reputation as a leading cloud vendor. (That deal is on hold and under review, however, after rival bidder Amazon raised questions about the bidding process.) So far in 2020, a surge in remote working as a result of the coronavirus pandemic has led to even greater demand for the company’s Azure cloud service and its Office 365 workplace apps. Microsoft’s shares hit an all-time high in February at nearly $189, underscoring Wall Street’s enthusiasm for the company's evolution under CEO Satya Nadella.

As we face unprecedented collective challenges, cooperation has become a business superpower.

16.CTW20.Microsoft

Microsoft started off 2020 with a startling announcement: By 2030, the software titan aims to be not just carbon neutral, but carbon negative. By 2050, Microsoft says, it will have negated all of its carbon emissions since its 1975 founding. (Pictured here: Microsoft president Brad Smith, chief financial officer Amy Hood and CEO Satya Nadella on the day of the announcement, Jan. 15, 2020.) 
 
The company is tackling nearer-term crises too. When the world’s focus shifted to the coronavirus, Microsoft responded by offering 25 million people free online training in digital skills such as data analytics, IT, and cybersecurity. It represented a vital lifeline to those whose jobs may never come back—and in particular for women and minorities, who have been hit hardest financially by the pandemic. 
 
That short-term offering is part of a much broader Microsoft upskilling effort. In Africa, for instance, Microsoft’s 4Afrika initiative has established training programs to address the continent’s digital skills gap. It’s a good deed, but it isn’t charity: Microsoft sees Africa as a growth market, and 4Afrika is busy signing up customers and spotting new business ideas.

Here are the World's Most Admired Companies for 2019 as ranked in their industries. See who made the list.

This year's Fortune Global 500 generated $27.7 trillion in revenues and $1.5 trillion in profits.

This year's Fortune 500 marks the 65th running of the list.

Here are the World's Most Admired Companies for 2018 as ranked in their industries. See who made the list.

This year's Fortune 500 marks the 64th running of the list.

Here’s our look at 57 companies that do well by doing good.

Here are the World's Most Admired Companies for 2017 as ranked in their industries. See who made the list.

This year's Fortune 500 marks the 63rd running of the list.

Here’s our look at 50 companies that do well by doing good.

Here are the World's Most Admired Companies for 2016 as ranked in their industries. See who made the list.

This year's Fortune Global 500 generated $27.6 trillion in revenues and $1.5 trillion in profits.

This year's Fortune 500 marks the 62nd running of the list.

Business insiders have spoken: Asked which companies they most admire, more than 4,100 executives, directors, and analysts chose these top 50 All-Stars.

The world's 500 largest companies generated $31.2 trillion in revenues and $1.7 trillion in profits in 2014. Together, this year's Fortune Global 500 employ 65 million people worldwide and are represented by 36 countries.

This year's Fortune 500 marks the 61st running of the list. Wal-Mart claims the top spot again. See who made the list.

Google tops the list once again, marking its eighth appearance and fifth time as No. 1.

Fortune 100 Best Companies to Work For

Global business is back. After limping through a worldwide financial crisis and economic slowdown, the 500 largest companies ranked by revenues shattered all sorts of performance records in 2013: They racked up combined revenues of $31.1 trillion, up 2.5% from 2012, and profits soared 27% to nearly $2 trillion. China’s 95 companies (up from 89 last year) posted $5.8 trillion in revenues. The U.S. has four fewer companies on the list than last year but remains (for now) the country leader, with 128 corporations on the list—including No. 1 Wal-Mart Stores—reporting $8.6 trillion in revenues. 

Wal-Mart stayed on top as its sales crept closer to half-a-trillion dollars. Apple moved into the top five. And UnitedHealth Group continued its steady climb. 

Change The World

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Routinely ranked as one of the world’s most valuable companies by market capitalization, the software giant makes the popular Windows PC operating system and the Microsoft 365 suite of business productivity software. It also runs the Microsoft Azure cloud computing service, and owns the Xbox gaming platform, the code repository GitHub, and the professional social network LinkedIn. Cofounded by Bill Gates in 1975, Microsoft operates data centers around the globe to support its cloud computing services. In recent years, Microsoft has been at the forefront of the generative AI revolution through its partnership with OpenAI, its Copilot-branded AI applications, and its own AI models produced in-house.

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Q2 2025

Microsoft (MSFT): Company Profile, Stock Price, News, Rankings

legacy

Microsoft

microsoft

Greetings, and welcome to the Microsoft Fiscal Year 2025 Second Quarter Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brett Iverson, Vice President of Investor Relations.

Good afternoon, and thank you for joining us today. On the call with me are Satya Nadella, Chairman and Chief Executive Officer Amy Hood, Chief Financial Officer Alice Jolla, Chief Accounting Officer and Keith Dolliver, Corporate Secretary and Deputy General Counsel. On the Microsoft Investor Relations website, you can find our earnings press release and financial summary slide deck, which is intended to supplement our prepared remarks during today's call and provides the reconciliation of differences between GAAP and non GAAP financial measures. More detailed outlook slides will be available on the Microsoft Investor Relations website when we provide outlook commentary on today's call. On this call, we will discuss certain non GAAP items.

The non GAAP financial measures provided should not be considered as a substitute for or superior to the measures of financial performance prepared in accordance with GAAP. They are included as additional clarifying items to aid investors in further understanding the company's 2nd quarter performance in addition to the impact these items and events have on the financial results. All growth comparisons we make on the call today relate to the corresponding period of last year unless otherwise noted. We will also provide growth rates in constant currency when available as a framework for assessing how our underlying businesses performed excluding the effect of foreign currency rate fluctuations. Where growth rates are the same at constant currency, we will refer to the growth rate only.

We will post our prepared remarks to our website immediately following the call until the complete transcript is available. Today's call is being webcast live and recorded. If you ask a question, it will be included in our live transmission, in the transcript and in any future use of the recording. You can replay the call and view the transcript on the Microsoft Investor Relations website. During this call, we will be making forward looking statements, which are predictions, projections or other statements about future events.

These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ because of factors discussed in today's earnings press release, in the comments made during this conference call and in the Risk Factors section of our Form 10 ks, Forms 10Q and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward looking statement. And with that, I'll turn the call over to Satya.

Thank you, Brett. This quarter, we saw continued strength in Microsoft Cloud, which surpassed $40,000,000,000 in revenue for the first time, up 21% year over year. Enterprises are beginning to move from proof of concepts to enterprise wide deployments to unlock the full ROI of AI. And our AI business has now surpassed an annual revenue run rate of $13,000,000,000 up 175% year over year. Before I get into the details of the quarter, I want to comment on the core thesis behind our approach to how we manage our fleet and how we allocate our capital to compute.

AI scaling laws continue to compound across both pre training and inference time compute. We ourselves have been seeing significant efficiency gains in both training and inference for years now. On inference, we have typically seen more than 2x price performance gain for every hardware generation and more than 10x for every model generation due to software optimizations. And as AI becomes more efficient and accessible, we will see exponentially more demand. Therefore, much as we have done with the commercial cloud, we are focused on continuously scaling our fleet globally and maintaining the right balance across training and inference as well as geo distribution.

From now on, it's a more continuous cycle governed by both revenue growth and capability growth, thanks to the compounding effects of software driven AI scaling laws and Moore's Law. With that, I will walk through the progress we are making across every layer of the tech stack. Azure is the infrastructure layer for AI. We continue to expand our data center capacity in line with both near term and long term demand signals. We have more than doubled our overall data center capacity in the last 3 years and we have added more capacity last year than any other year in our history.

Our data centers, networks, racks and silicon are all coming together as a complete system to drive new efficiencies to power both the cloud workloads of today and the next generation AI workloads. We continue to take advantage of Moore's Law and refresh our fleet as evidenced by our support of the latest from AMD, Intel, NVIDIA as well as our first party silicon innovation from Maya, Cobalt Boost and HSM. When it comes to cloud migrations, we continue to see customers like UBS move workloads to Azure. UBS alone migrated mainframe workloads encompassing nearly 400,000,000,000 records and 2 petabytes of data. And we remain the cloud of choice for customers' mission critical Oracle, SAP and VMware apps.

At the data layer, we are seeing Microsoft Fabric breakout. We now have over 19,000 paid customers from Hitachi to Johnson Controls to Schaeffler. Fabric is now the fastest growing analytics product in our history. Power BI is also deeply integrated with Fabric with over 30,000,000 monthly active users, up 40% since last year. Beyond Fabric, we are seeing new AI driven data patterns emerge.

If you look underneath ChatGPT or Copilot or Enterprise AI apps, you see the growth of raw storage, database services and app platform services as these workloads scale. The number of Azure Open AI apps running on Azure databases and Azure app services more than doubled year over year, driving significant growth in adoption across SQL Hyperscale and Cosmos DB. Now on to AR platform and tools. As we shared last week, we are thrilled Open AI has made a new large Azure commitment. Through our strategic partnership, we continue to benefit mutually from each other's growth.

And with OpenAI's APIs exclusively running on Azure, customers can count on us to get access to the world's leading models. And OpenAI has a lot more coming soon, so stay tuned. Azure AI Foundry features best in class tooling, runtimes to build agents, multi agent apps, AI ops, API access to thousands of models. 2 months in, we already have more than 200,000 monthly active users and we are well positioned with our support of both OpenAI's leading models and the best selection of open source models and SLMs. DeepSeq's R1 launched today via the model catalog on Foundry and GitHub with automated red teaming, content safety integration and security scanning.

Our 5 family of SLMs has now been downloaded over 20,000,000 times. And we also have more than 30 models from partners like Bayer, Page AI, Rockwell Automation, Siemens to address industry specific use cases. With AI, how we build, deploy and maintain code is fundamentally changing. And GitHub Copilot is increasingly the tool of choice for both digital natives like ASOS and Spotify as well as world's largest enterprises like HP, HSBC and KPMG. We've been delighted by the early response to GitHub Copilot and Versus Code with more than a 150,000,000 developers, up 50% over the past 2 years.

Now on to the future of work. Microsoft 365 Copilot is the UI for AI. It helps supercharge employee productivity and provides access to a swarm of intelligent agents to streamline employee workflow. We are seeing accelerated customer adoption across all deal sizes as we win new Microsoft 365 Copilot customers and see the majority of existing enterprise customers come back to purchase more seats. When you look at customers who purchased Copilot during the Q1 of availability, they have expanded their seats collectively by more than 10x over the past 18 months.

To share just one example, Novartis has added thousands of seats each quarter over the year and now have 40,000 seats. Barclays, Carrier Group, Pearson and University of Miami all purchased 10,000 or more seats this quarter. And overall, the number of people who use CoPilot daily again more than doubled quarter over quarter. Employees are also engaging with CoPilot more than ever. Usage intensity increased more than 60% quarter over quarter and we are expanding our TAM with CoPilot chat which was announced earlier this month.

Copilot Chat along with Copilot Studio is now available to every employee to start using agents right in the flow of work. With Copilot Studio, we are making it as simple to build an agent as it is to create an Excel spreadsheet. More than 160,000 organizations have already used Copilot Studio and they collectively created more than 400,000 custom agents in the last 3 months alone, up over 2x quarter over quarter. We've also introduced our own first party agents to facilitate meetings, manage projects, resolve common HR and IT queries and access SharePoint data. And we also continue to see partners like Adobe, SAP, ServiceNow and Workday build their 3rd party agents and integrate with Copilot.

What is driving Copilot as the UI for AI as well as our momentum with agents is our rich data cloud, which is the world's largest source of organizational knowledge. Billions of emails, documents and chats, hundreds of millions of Teams meetings and millions of SharePoint sites are added each day. This is the enterprise knowledge cloud. It is growing fast, up over 25% year over year. More broadly, what we are seeing is Copilot plus agents disrupting business applications And we are leaning into this.

With Dynamics 365, we took share as organizations like Ecolab, Lenovo, RTX, Total Energy and Vizient switched to our AI powered apps from legacy providers. In healthcare, Dax Co pilot surpassed 2,000,000 monthly physician patient encounters, up 54% quarter over quarter. It is being used by top providers like Mass General Brigham, Michigan Medicine, Vanderbilt University Medical Center to increase productivity of their physicians. When it comes to Windows, we are seeing momentum build as we approach end of support for Windows 10. Customers are choosing the latest Windows 11 devices for their enhanced security and advanced AI capabilities.

15% of premium price laptops in the U. S. This holiday were CoPilot Plus PCs and we expect the majority of the PCs sold in the next several years to be CoPilot Plus PCs. We also see more and more developers from Adobe and CapCut to WhatsApp build apps that leverage built in NPUs. And they will soon be able to run DeepSeq's R1 digital models locally on CoPilot Plus PCs as well as the vast ecosystem of GPUs available on Windows.

And beyond CoPilot Plus PCs, the most powerful AI workstation for local development is a Windows PC running WSL2 powered by NVIDIA RTX GPUs. Now on to security. We continue to make progress with our Secure Future initiative and we are applying what we have learned introducing over 80 new product capabilities over the past year. With security co pilot organizations across private and public sector like City of Johannesburg, Eastman, Intesa, National Australia Bank, NTT can resolve incidents 30% faster. Data governance is increasingly critical and customers now use Microsoft Purview to audit over 2,000,000,000 Copilot interactions for safe and compliant use.

Now on to our consumer businesses starting with LinkedIn. More professionals than ever are engaging in high value conversations on LinkedIn with comments up 37% year over year. Short form video continues to grow on the platform with video creation all up growing at twice the rate of other post formats. We're also innovating with agents to help recruiters and small businesses find qualified candidates faster and our hiring business again took share. In subscriptions, LinkedIn premiums surpassed $2,000,000,000 in annual revenue for the first time this quarter.

Subscriber growth has increased nearly 50% over the past 2 years and nearly 40% of subscribers have used our AI features to improve their profiles. And LinkedIn marketing solution remains the leader in B2B advertising. Now on to search advertising and news. We once again took share across Bing and Edge. Edge surpassed 30% market share in the U.

S. On Windows and has taken share for 15 consecutive quarters. The investments we have made in improving our ad rates are paying off and advertisers increasingly see our network as an essential platform to optimize ROI. And our CoPilot consumer app is seeing increased engagement and retention with its improved speed, unique personality, 1st of its kind features like CoPilot Vision. Just today we made ThinkDeeper powered by O1 free for all CoPilot users globally.

Now on to gaming. We are focused on improving the profitability of the business in order to position it for long term growth driven by higher margin content and platform services and we are delivering on this plan. Black Ops 6 was top selling game on Xbox and PlayStation this quarter and saw more players in its launch quarter than any other paid release in the franchise history. And we saw rave reviews of Indiana Jones and the Great Circle, which has already been played by more than 4,000,000 people. We also continue to see strong momentum for Xbox Cloud Gaming with a record 140,000,000 hours streamed this quarter.

All up Game Pass set a new quarterly record for revenue and grew its PC subscriber base by over 30% as we focus on driving fully paid subscribers across endpoints. In closing, we continue to innovate across our tech stack to help our customers in this AI era and I'm energized by the many opportunities ahead. With that, let me turn it over to Amy.

Thank you, Satya and good afternoon everyone. This quarter, revenue was $69,600,000,000 up 12%. Gross margin dollars increased 13% 12% in constant currency, while operating income increased 17% 16% in constant currency. Earnings per share was $3.23 an increase of 10%. We delivered another quarter of double digit top and bottom line growth.

Results were driven by strong demand for our cloud and AI offerings, while we also improved our operating leverage with higher than expected operating income growth. As you heard from Satya, our AI business annual revenue run rate surpassed $13,000,000,000 and was above expectations. Commercial bookings increased 67% and 75% in constant currency and were significantly ahead of expectations driven by Azure commitments from OpenAI. Execution was strong across our core annuity sales motions with growth in the number of $100,000,000 plus contracts for both Azure and Microsoft 365. Commercial remaining performance obligation increased to $298,000,000,000 up 34% and 36% in constant currency.

Roughly 40% will be recognized in revenue in the next 12 months, up 21% year over year. The remaining portion recognized beyond the next 12 months increased 45%. And this quarter, our annuity mix was 97%. FX did not have a significant impact on our results and was roughly in line with expectations on total company revenue, more personal computing revenue, total company COGS and operating expense. Sx decreased revenue more than expected in our commercial segments.

Microsoft Cloud revenue was $40,900,000,000 and grew 21%. Microsoft Cloud gross margin percentage was 70%, in line with expectations and decreased 2 points year over year driven by scaling our AI infrastructure. Company gross margin percentage increased slightly year over year to 69%, primarily driven by sales mix shift to higher margin businesses, as well as improvement in gaming and search, partially offset by the impact of scaling our AI infrastructure. Operating expenses increased 5% lower than expected and operating margins increased 2 points year over year to 45%. The better than expected margin expansion was driven by delivering efficiencies across our businesses as we invest to scale AI infrastructure and build AI applications.

At a total company level, headcount at the end of December was 2% higher than a year ago and was relatively unchanged from last quarter. Now to our segment results. Revenue from Productivity and Business Processes was $29,400,000,000 and grew 14% and 13% in constant currency even with the unfavorable FX impact noted earlier. Results were ahead of expectations, driven by Microsoft 365 Commercial. Microsoft 365 Commercial Cloud revenue increased 16% and 15% in constant currency, slightly ahead of expectations due to better than expected performance in E5 and Microsoft 365 Copilot.

With M365 Copilot, we continue to see growth in adoption, expansion and usage. ARPU growth was again driven by E5 and M365 Copilot. Paid M365 commercial seats grew 7% year over year with installed base expansion across all customer segments, though primarily in our small and medium business and frontline worker offerings. M365 commercial products revenue increased 13%, significantly ahead of expectations driven by higher than expected transactional purchasing with the launch of Office 2024 as well as the Windows commercial on premises components from the better than expected performance of M365 Suites noted earlier. M365 Consumer Cloud revenue increased 8%, slightly ahead of expectations.

We saw continued momentum in M365 Consumer Subscriptions, which grew 10% to $86,300,000 with mix shift to M365 Basic. LinkedIn revenue increased 9% with continued growth across all lines of business. In our Talent Solutions business, results were slightly below expectations driven by continued weakness in the hiring market in key verticals. Dynamics 365 revenue increased 19% 18% in constant currency, slightly ahead of expectations with growth across all workloads. Segment gross margin dollars increased 13% 12% in constant currency and gross margin percentage decreased slightly year over year driven by scaling our AI infrastructure.

Operating expenses increased 6% and operating income increased 16% and 15% in constant currency. Next, the Intelligent Cloud segment. Revenue was $25,500,000,000 and grew 19% with more unfavorable FX impact than expected. Excluding the unfavorable FX impact, results in Azure non AI services, on prem server and enterprise and partner services were slightly lower than expected, partially offset by better than expected results in Azure AI services. Azure and other cloud services revenue grew 31%.

Azure growth included 13 points from AI Services, which grew 157% year over year and was ahead of expectations even as demand continued to be higher than our available capacity. Growth in our non AI services was slightly lower than expected due to go to market execution challenges, particularly with our customers that we primarily reached through our scale motions as we balance driving near term non AI consumption with AI growth. In our on premises server business, revenue decreased 3%, slightly below expectations driven by slower than expected purchasing around Windows Server 2025 launch. Enterprise and Partner Services revenue decreased 1%, below expectations with lower than expected performance across Enterprise Support Services and Industry Solutions. Segment gross margin dollars increased 12% and 13% in constant currency and gross margin percentage decreased 4 points year over year driven by scaling our AI infrastructure.

Operating expenses increased 10% and operating income grew 14%. Now to more personal computing. Revenue was $14,700,000,000 relatively unchanged year over year with better than expected results driven primarily by Windows OEM prebuilts, usage from a third party partnership in search as well as Call of Duty launch performance in gaming. Windows OEM and devices revenue increased 4% year over year ahead of expectations, driven by commercial inventory builds in advance of Windows 10 end to support as well as uncertainty around tariffs. Search and news advertising revenue ex TAC increased 21% 20% in constant currency, ahead of expectations, driven by usage from a third party partnership.

Growth continues to be driven by rate expansion and healthy volume growth in both Edge and Bing. And in Gaming, revenue decreased 7% 8% in constant currency as content and services growth continued to be offset by hardware declines. Xbox content and services revenue increased 2% ahead of expectations, driven by stronger than expected performance in Blizzard and Activision content, including Call of Duty. Segment gross margin dollars increased 13% 12% in constant currency. Gross margin percentage increased 6 points year over year, driven by sales mix shift to higher margin businesses as well as strong execution on margin improvement in gaming and search.

Operating expenses decreased 1%. Operating income increased 32% and 30% in constant currency driven by continued prioritization of higher margin opportunities. Now back to total company results. Capital expenditures including finance leases were $22,600,000,000 in line with expectations and cash paid for PP and E was $15,800,000,000 More than half of our cloud and AI related spend was on long lived assets that will support monetization over the next 15 years and beyond. The remaining cloud and AI spend was primarily for servers, both CPUs and GPUs, to serve customers based on demand signals, including our customer contracted backlog.

Cash flow from operations was $22,300,000,000 up 18%, driven by strong cloud billings and collections, partially offset by higher supplier, employee and tax payments. Free cash flow was $6,500,000,000 down 29% year over year, reflecting the capital expenditures noted earlier. This quarter, other income expense was negative $2,300,000,000 lower than our October guidance due to the impairment charge from our cruise investment. Our effective tax rate came in slightly lower than anticipated at 18%. And finally, we returned $9,700,000,000 to shareholders through dividends and share repurchases.

Now moving to our Q3 outlook, which unless specifically noted otherwise is on a U. S. Dollar basis. First, FX. With the strengthening of the U.

S. Dollar since October, we now expect FX to decrease total revenue growth by 2 points. Within the segments, we expect FX to decrease revenue growth by 2 points in Productivity and Business Processes and Intelligent Cloud and roughly one point in More Personal Computing. When compared to our October guidance assumptions on Q3 FX impact, this is a decrease to total revenue of roughly $1,000,000,000 We expect FX to decrease COGS growth by approximately 2 points and operating expense growth by approximately 1 point. Our outlook has many of the trends we saw in Q2 continue through Q3.

Demand for our differentiated cloud and AI offerings across the Microsoft Cloud to drive another quarter of strong growth. In commercial bookings, with a relatively flat expiry base and the strong prior year comparable in terms of large Azure contracts, we expect growth to be roughly flat year over year. We expect consistent execution across our core annuity sales motions and continued long term commitments to our platform. As a reminder, larger long term Azure contracts, which are more unpredictable in their timing, can drive increased quarterly volatility in our bookings growth rate. Microsoft Cloud gross margin percentage should be roughly 69%, down year over year, driven by the impact of scaling our AI infrastructure.

Next, to segment guidance. In Productivity and Business Processes, we expect revenue to grow between 11% 12% in constant currency or $29,400,000,000 to $29,700,000,000 Microsoft 365 Commercial Cloud revenue growth should be between 14% 15% in constant currency, relatively stable compared to our better than expected Q2 results. We expect continued ARPU growth through E5 and M365 Copilot and we again expect some seat growth moderation given the size of the installed base. For M365 commercial products, we expect revenue to be relatively unchanged year over year. As a reminder, M365 commercial products include Windows commercial on premises components of M365 suites.

So our quarterly revenue growth can have variability primarily from in period revenue recognition depending on the mix of contracts. M365 Consumer Cloud revenue growth should be in the mid to high single digits driven by M365 subscriptions. For LinkedIn, we expect revenue growth in the lowtomidsingle digits. Although we expect growth across all businesses, the Q2 trends in Talent Solutions should continue in Q3 as a headwind to growth. And in Dynamics 365, we expect revenue growth to be in the mid teens, driven by continued growth across all workloads.

For Intelligent Cloud, we expect revenue to grow between 19% 20% in constant currency or $25,900,000,000 to 26 point $2,000,000,000 Revenue will continue to be driven by Azure, which as a reminder, can have quarterly variability primarily from in period revenue recognition depending on the mix of contracts. In Azure, we expect Q3 revenue growth to be between 31% 32% in constant currency driven by strong demand for our portfolio of services. As we shared in October, the contribution from our AI services will grow from increased AI capacity coming online. In non AI services, healthy growth continues, although we expect ongoing impact through H2 as we work to address the execution challenges noted earlier. And while we expect to be AI capacity constrained in Q3, by the end of FY 'twenty five, we should be roughly in line with near term demand given our significant capital investments.

In our on premises server business, we expect revenue to decline in the mid single digits, driven by a decrease in transactional purchasing. And in Enterprise and Partner Services, we expect revenue growth to be in the low to mid single digits. In More Personal Computing, we expect revenue to be $12,400,000,000 to $12,800,000,000 with continued prioritization of higher margin opportunities. Windows OEM and devices revenue should decline in the low to mid single digits. We expect revenue from Windows OEM to be relatively flat year over year as our outlook assumes inventory levels will normalize.

Actual results may differ based on current tariff uncertainties. Devices revenue will decline. Search and news advertising ex tech revenue growth should be in the mid teens from continued growth in both volume and revenue per search with share gains across Edge and Bing. Growth is expected to moderate from last quarter, primarily due to additional FX impact and as the 3rd party partnership usage noted earlier, returns to more normal levels. Search ex tech growth will be higher than overall Search and News advertising revenue growth, which we expect to be in the mid to high single digits.

And in Gaming, we expect revenue growth to be in the low single digits. We expect Xbox Content Services revenue growth to be in the lowtomidsingle digits driven by 1st party content as well as Xbox Game Pass. Hardware revenue will decline year over year. Now back to company guidance. We expect COGS to grow between 19% 20% constant currency or to be between US21.65 billion dollars to US21.85 billion dollars and operating expense to grow between 5% and 6% in constant currency or to be between US16.4 billion dollars 16.5 billion dollars Other income and expense is expected to be roughly negative $1,000,000,000 primarily driven by investments accounted for under the equity method.

As a reminder, we do not recognize mark to market gains or losses on equity method investments. And lastly, we expect our Q3 effective tax rate to be approximately 18%. Now some additional thoughts on the rest of the fiscal year and beyond. First, FX. With the strengthening of the U.

S. Dollar since October, we now expect FX to decrease Q4 revenue and COGS growth by more than one point and operating expense growth by roughly one point. Next, capital expenditures. We expect quarterly spend in Q3 and Q4 to remain at similar levels as our Q2 spend. In FY 'twenty six, we expect to continue investing against strong demand signals, including customer contracted backlog we need to deliver against across the entirety of our Microsoft Cloud.

However, the growth rate will be lower than FY 'twenty five and the mix of spend will begin to shift back to short lived assets, which are more correlated to revenue growth. As a reminder, our long lived infrastructure investments are fungible, enabling us to remain agile as we meet customer demand globally across our Microsoft cloud, including AI workloads. As always, there can be quarterly spend variability from cloud infrastructure build outs and the timing of delivery of finance leases. For the full fiscal year, we continue to expect double digit revenue and operating income growth as we focus on delivering efficiencies across both COGS and operating expense. And given the operating leverage that we've delivered throughout the year, inclusive of efficiency gains as we scale our AI infrastructure and utilize our own AI solutions, we now expect FY 'twenty five operating margins to be up slightly year over year.

And finally, our FY 'twenty five full year effective tax rate should be between 18% 19%. In closing, we are committed to delivering real world AI solutions that help customers grow and improve their results. We are confident in our leadership position as we grow with our customers. Before turning to Q and A, I have one special thank you. Brett Iverson is moving to a new role here as the Head of our Americas sales finance team.

On behalf of the company, thank you for your tremendous impact leading Investor Relations for the past 4 years and for the partnership with both Satya and me. And I'd like to welcome Jonathan Nielsen, the former Head of Finance for our Security Products, who is returning to Investor Relations to lead the team. With that, let's go to Q and A, Brett.

Thanks, Amy. We'll now move over to Q and A. Out of respect for others on the call, we request that participants please only ask one question. Operator, can you please repeat your instructions?

Thank you. And our first question comes from the line of Keith Weiss with Morgan Stanley. Please proceed.

Hi, Colin. Thank you guys for taking the question. And echoing Amy's comments, Brett, congratulations on the new role. It's been a pleasure working with you and best of luck in that new role. Looking at the quarter, another really solid quarter when it comes to commercial bookings.

But again, we were a little bit disappointed on Azure coming in at the bottom end of the guidance range. Amy, I was hoping you could dig into perhaps what some of those execution issues were, what the resolution to those issues were? And do we still feel comfortable in the acceleration into the back half of the year that you were talking about after the June quarter and after last quarter? Thank you very much.

Thanks, Keith. Let me spend a little time on that, about what we saw in Q2 and give you some additional background on the near term execution issues that we're talking about. First, let me be very specific. They are in the non AI ACR component. Our AI Azure AI results were better than we thought due to very good work by the operating teams pulling in, some delivery dates even by weeks.

When you're capacity constrained, weeks matter and it was good execution by the team and you see that in the revenue results. On the non AI side, really the challenges were in what we call the scale motions. So think about primarily these are customers we reach through partners and through more indirect methods of selling. And really the art form there is as these customers, which we reach in this way, are trying to balance how do you do an AI workload with continuing some of the work they've done on migrations and other, fundamentals. We then took our sales motions in the summer and really changed to try to balance those 2.

Microsoft (MSFT) Q2 2025 Earnings Call Transcript

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