“We are only at the beginning phases of AI diffusion and already Microsoft has built an AI business that is larger than some of our biggest franchises,” said Satya Nadella, chairman and chief executive officer of Microsoft. “We are pushing the frontier across our entire AI stack to drive new value for our customers and partners.”

Microsoft Corp. reported robust financial results for the quarter ended December 31, 2025, driven largely by accelerating demand for artificial intelligence and cloud services. The company posted revenue of $81.3 billion, marking a 17 per cent year-on-year increase, while operating income rose 21 per cent to $38.3 billion.

The technology giant’s AI-led cloud transformation continues to emerge as a key growth driver, with Microsoft Cloud revenue surpassing $51.5 billion during the quarter, reflecting a 26 per cent increase compared to the same period last year. Commercial remaining performance obligation also surged 110 per cent to $625 billion, underscoring strong long-term enterprise demand for Microsoft’s AI-enabled cloud ecosystem.

“Microsoft Cloud revenue crossed $50 billion this quarter, reflecting the strong demand for our portfolio of services,” said Amy Hood, executive vice president and chief financial officer of Microsoft. “We exceeded expectations across revenue, operating income, and earnings per share.”

Microsoft’s Intelligent Cloud segment, which includes Azure, remained central to the company’s AI strategy, generating $32.9 billion in revenue, a 29 per cent increase year-over-year. Azure and other cloud services revenue grew 39 per cent, highlighting the increasing adoption of AI-driven workloads, generative AI applications, and enterprise digital transformation initiatives.

The Productivity and Business Processes segment also demonstrated strong growth, generating $34.1 billion in revenue, up 16 per cent. Microsoft 365 Commercial cloud revenue rose 17 per cent, while Microsoft 365 Consumer cloud revenue surged 29 per cent, reflecting growing integration of AI-powered productivity tools across business and consumer platforms. LinkedIn revenue increased 11 per cent, while Dynamics 365 revenue climbed 19 per cent, supported by AI-enhanced enterprise solutions.

Meanwhile, revenue in the More Personal Computing segment declined 3 per cent to $14.3 billion. Windows OEM and Devices revenue saw a marginal 1% increase, while Xbox content and services revenue declined 5 per cent. However, search and news advertising revenue, excluding traffic acquisition costs, grew 10 per cent, supported by AI-driven search innovations and enhanced advertising solutions.

Microsoft also reported strong profitability growth, with net income reaching $38.5 billion on a GAAP basis, representing a 60 per cent increase. Non-GAAP net income rose 23 per cent to $30.9 billion, excluding the impact of investments in OpenAI. Diluted earnings per share increased 60 per cent to $5.16 on a GAAP basis and 24 per cent to $4.14 on a non-GAAP basis.

The company returned $12.7 billion to shareholders through dividends and share repurchases during the quarter, marking a 32 per cent increase compared to the same period in the previous fiscal year.

Microsoft’s latest results reinforce the company’s aggressive expansion of its AI ecosystem, spanning infrastructure, productivity applications, enterprise solutions, and developer platforms. As enterprises increasingly adopt generative AI and intelligent automation, Microsoft continues to position its cloud and AI stack as a core engine for future growth.