Microsoft's (MSFT) Q1 2025 earnings report highlights a strong financial performance, with total revenue reaching $65.59 billion, a 16% year-over-year increase compared to $56.52 billion in Q1 2024. This growth was driven by robust performance across all major segments: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing.

The Productivity and Business Processes segment generated $28.32 billion in revenue, reflecting a 12% year-over-year growth. This segment includes products like Office Commercial, Office Consumer, LinkedIn, and Dynamics. Operating income for this segment also grew by 16% year-over-year, reaching $16.52 billion.

The Intelligent Cloud segment reported revenue of $24.09 billion, marking a 20% year-over-year increase. This segment's growth was primarily driven by Azure and other cloud services. Operating income for Intelligent Cloud rose by 18% year-over-year, reaching $10.50 billion.

The More Personal Computing segment achieved $13.18 billion in revenue, a 17% year-over-year increase. However, operating income for this segment declined by 4% year-over-year, totaling $3.53 billion. This segment includes Windows OEM, Surface, and Xbox content and services.

Microsoft's net income for Q1 2025 was $24.67 billion, a 10.6% increase from $22.29 billion in Q1 2024. Earnings per share (EPS) also improved, with basic EPS at $3.32 and diluted EPS at $3.30, compared to $3.00 and $2.99, respectively, in the prior year.

The company's gross margin for the quarter was $45.49 billion, up from $40.22 billion in Q1 2024, reflecting a 13% year-over-year increase. This was driven by higher revenue and a favorable sales mix, particularly in cloud services.

Operating expenses increased across key areas: Research and Development (R&D) expenses rose to $7.54 billion (up from $6.66 billion in Q1 2024), while Sales and Marketing expenses increased to $5.72 billion (up from $5.19 billion). General and administrative expenses also grew to $1.67 billion from $1.47 billion in the prior year.

Geographically, the United States contributed $33.91 billion to total revenue, while other countries accounted for $31.67 billion. Both regions showed strong growth compared to Q1 2024, with the U.S. growing from $28.81 billion and other countries from $27.71 billion.

Microsoft's cash flow from operations was $34.18 billion, a 12% increase from $30.58 billion in Q1 2024. This reflects strong operational efficiency and revenue growth. The company also returned significant capital to shareholders, with $6.17 billion in dividends and $4.11 billion in share repurchases during the quarter.

The company continues to invest heavily in its cloud infrastructure and AI capabilities, as evidenced by $14.92 billion in capital expenditures during the quarter, up from $9.92 billion in Q1 2024. These investments are aimed at supporting long-term growth in cloud and AI-driven services.