Microsoft’s big AI bet is finally paying off, as Azure does the heavy lifting
But, while Bing has leaned hard into AI, it hasn’t moved the needle against Google’s dominance in search.
After years of building, bundling, and betting big on artificial intelligence, it appears that Microsoft's bold, multi-year investment in AI has finally paid off, and the financial results are spectacular.
Azure and the rest of Microsoft's Intelligent Cloud division have been a huge cash cow for the tech giant in recent earnings reports, thanks in large part to the artificial intelligence services that the company offers – with the company's valuation soaring past $4 trillion briefly last week.
During the second quarter of 2025, Microsoft pulled in $76.7 billion in revenue, up 18% year-over-year, with Azure and its AI-powered tools leading the charge. It wasn’t just a fluke quarter boosted by hardware sales or a licencing twist. The software giant's growth proved that Big Tech’s AI push isn’t slowing down anytime soon.
Azure, Copilot, and the AI Push
Let’s start with Azure, Microsoft’s cloud platform that’s slowly become the backbone of its AI ambitions. Imagine it as the launchpad for enterprise AI. Businesses building large-scale language models, running real-time analytics, or embedding AI into customer workflows are doing much of that through Azure.
In Q2, Azure helped power the Intelligent Cloud division to $26.3 billion in revenue, up 17% year over year and ahead of estimates. And while Azure is still behind AWS in market share, it’s closing the gap. That’s no small feat given AWS’s head start and Google Cloud fighting for its own piece of the pie.
Copilot is the other piece of the puzzle. From Word and Excel to GitHub and Outlook, Copilot is quietly changing how people work. It’s not just about automation, it’s about transforming everyday tasks into faster, smarter processes. The question now is how well Microsoft can monetize that transformation. Early signs are promising, with its Business Software segment (where most AI integrations live) growing 15.7%, a beat over Wall Street’s expectations.
Productivity Beats Hype, But Now Comes the Hard Part
One of Microsoft’s biggest strengths is how it packages everything together. It’s not selling AI tools in a vacuum, it’s bundling them into products people already use every day. That kind of upselling power is hard to replicate.
But it’s not all smooth sailing. Personal Computing, which includes Windows, Xbox, and Bing, is still the laggard. While Bing has leaned hard into AI, it hasn’t moved the needle against Google’s 80%+ dominance in search. That said, even in this slower segment, growth is picking up — up 10.4% annualised over the past two years.
And Microsoft’s bottom line is holding strong. This quarter’s operating margin hit 44.9%, up from last year despite a dip in gross margin. That means the company is getting more efficient, a good sign for long-term profitability as AI investments grow.
Emmanuel Oyedeji
Is AI Really Moving the Needle?
Short answer: yes, but it’s early. Microsoft’s overall revenue grew 18.1% year over year, landing at $76.4 billion. Its earnings per share was up by 24% to $3.65, comfortably beating estimates. These aren’t just solid numbers, they reflect a business that’s figuring out how to turn hype into sustainable returns.
The road ahead still has questions. How much will Copilot add to recurring revenue? Will enterprises stick with Azure for AI long-term? But this quarter gave us something more important than answers; it gave us proof that Microsoft’s AI strategy is working.
And Microsoft isn't merely panning the river if artificial intelligence is indeed the next gold rush. It is attempting to lay the railroad.
