Microsoft Corp Q4 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Keith Weiss - Morgan Stanley - Analyst : Congratulations on a fantastic end to FY25. I've been covering Microsoft for a while, I don't think I've ever seen a quarter where like everything came together this well. So congratulations on that execution. Maybe a little bit longer term focus question to start out. You guys have always had software startups as customers and potentially merging competitors, but the AI Labs now feel different. Investors are ascribing valuations which assume these companies become major players in software. They're underwriting revenue forecasts measured in the tens of billions, if not hundreds of billions. And these startups have also grown to be some of your biggest customers. So they're contributing significantly to Microsoft today. So it seems like there's a lot of potential opportunity in supporting those businesses, but also it's not certain that they're going to stay your customers as they scale. They could insource some of that that infrastructure, and they very likely emerge as potential competitors. So as managers of Microsoft, as managers of the capital, how do you, guys, manage that risk versus reward with these quickly emerging AI Labs and these AI startups?

Question: Mark Moerdler - Sanford C Bernstein & Co LLC - Analyst : I'll also give you my congratulations. Amazing. I didn't know how you were going to beat last quarter, and you did it. So congratulations. Satya and Amy, we're now two-plus years into the GenAI revolution and adoption is still early and ramping. What do you think is the best way that software companies are going to be able to monetize AI for SaaS? Do you believe there are differences in monetization for horizontal more general apps like M365 Copilot or Dynamics CRM Copilot versus very targeted capacities on the agentic side? And also, how should you think about the trajectory of SaaS AI margins over the long term?

Question: Mark Moerdler - Sanford C Bernstein & Co LLC - Analyst : Thank you. I appreciate it.

Question: Karl Keirstead - UBS AG - Analyst : Okay. Satya and Amy, this is the second quarter in a row of pretty material Azure upside from what sounds like an acceleration in on-prem to Azure migration activity. I'm just wondering if you can comment on the plethora of customer conversations you've had, whether there are a couple of two or three specific catalysts that are driving that migration. And how durable a trend do you think that is?

Question: Karl Keirstead - UBS AG - Analyst : Got it. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 30, 2025 / 9:30PM, MSFT.OQ - Q4 2025 Microsoft Corp Earnings Call

Question: Brent Thill - Jefferies LLC - Analyst : Satya, back to the strength across the board in the quarter, was there anything that jumped out at you or surprised you that you didn't think you were going to see but you did see in the quarter? Just the magnitude of upside, I think, had shocked many here.

Question: Raimo Lenschow - Barclays Services Corp - Analyst : Congrats from me as well. I had one question on Copilot, and I'm obviously a happy user here at Barclays. If you think about it, the one thing that we're all realizing is that Copilot is the AI part, but data is becoming more and more important. And then from there on, we can start thinking about agents. Where is the -- what are you seeing in your customer conversations, Satya, about like that understanding that Copilot is actually just the starting point, and then from there on it's becoming like much, much broader?

Question: Raimo Lenschow - Barclays Services Corp - Analyst : Thank you.

Question: Kash Rangan - Goldman Sachs Group Inc - Analyst : Amy, I want to acknowledge that I think a few quarters ago, you said that you reached a point in time where you can accelerate Azure while slowing down CapEx. So you did it. But what is the outlook? When I look at the CapEx guidance for the upcoming quarter, certainly, I would view that as a positive indicator of the book of business you have for your cloud services. But how should we think about the shape of the curve of CapEx vis-a-vis Azure growth rate in the years ahead, particularly as I listen to Satya's comments on the AI stack consuming more and more infrastructure? Are we at a point where we're going to have to continue to do this and we magically wait for inference and applications to kick in and, therefore, create a richer gross margin mix? And congrats on the quarter.

Question: Kash Rangan - Goldman Sachs Group Inc - Analyst : Sounds very encouraging. Thank you so much.

Question: Michael Turrin - Wells Fargo Securities LLC - Analyst : Congrats from me as well on the metrics working in concert here. Amy, maybe on margin, impressive to hear expectations for flat operating margin in the upcoming year as you absorb some of the mix shift towards Azure and some of the more AI-focused offerings. Can you speak in more detail just around your ability to manage those trade-offs and offset some of the mix shift? And I'm wondering specifically just on any productivity gains you're seeing from leveraging AI internally that you'd highlight or anything else you just mention in underpinning the full-year expectation there?

Question: Michael Turrin - Wells Fargo Securities LLC - Analyst : That all sounds pretty good. Thank you so much.