AI investments power Microsoft’s strong Q1 performance, revenue up 16% YoY

Microsoft has posted impressive first-quarter results for the fiscal year 2025, with total revenue reaching $65.6 billion—a 16% increase compared to the same period last year. The company’s net income rose by 11% to $24.7 billion.

Microsoft Cloud continued to drive growth, reporting revenues of $38.9 billion, a 22% rise year-on-year. Amy Hood, Microsoft’s chief financial officer, attributed the growth to “strong execution” from Microsoft’s sales teams and partners.

Chief executive Satya Nadella highlighted the impact of artificial intelligence (AI) in reshaping workflows across sectors, describing AI as pivotal to Microsoft’s strategic direction. “AI-driven transformation is changing work, work artefacts, and workflow across every role, function, and business process,” Nadella noted. He added that the company’s AI platforms and tools are attracting new customers, providing growth and operational advantages.

Microsoft has invested heavily in AI, notably through its partnership with start-up OpenAI. AI has become an anchor for Microsoft’s cloud computing service, Azure, whose growth held steady at around 34% this quarter. A significant portion of this growth—over one-third—has been driven by AI, with Microsoft benefiting from customers utilising OpenAI’s systems. Azure’s growth may moderate in the next quarter but is expected to accelerate in 2025 as new AI-driven data centre capacity comes online.

Microsoft does not disclose individual sales for its AI assistants—priced at $30 per month for business customers. However, its Microsoft 365 commercial cloud offerings, including Excel, Teams, and Word, grew by 15%.

Meanwhile, the company’s gaming segment reported robust results, with revenue reaching $5.6 billion, marking a 44% year-on-year increase. This growth follows Microsoft’s $69 billion acquisition of Activision Blizzard, which closed last October and has become central to Microsoft’s consumer-focused strategy.