Microsoft Cloud grew 27%, with revenue of $46.7bn, in its fourth-quarter 2025 financial results, the tech giant has reported. While the company has capitalised on linking its large software portfolio to cloud-based growth and, in particular, adoption of Copilot artificial intelligence (AI) services, the UK competition watchdog has found some of its licensing practices limit competition in the public cloud market.
Analyst Forrester recently warned that the rapid adoption of Microsoft Copilot is forcing the hand of IT decision-makers. But enterprise IT buyers continue to be drawn to Microsoft platforms, which bridge on-premise and public cloud IT infrastructure as well as provide a route to cloud-native computing and AI.
In fact, the company’s latest financial results demonstrate its effectiveness at connecting the dots to deliver value to enterprise IT buyers. Revenue increased 18% to $76.4bn compared with the same period in 2024.
Its M365 commercial cloud increased revenue by 18%, with the company seeing average revenue per user (ARPU) growth driven by its E5 and M365 Copilot offerings. The company said it experienced 6% growth in paid M365 commercial seats driven primarily by growth of its small and medium business and frontline worker offerings.
M365 commercial products revenue increased 9%, which Microsoft put down to higher-than-expected Office 2024 transactional purchasing, while M365 consumer cloud revenue grew 20%, driven by a price increase in January, and subscriber growth of 8%.
Revenue in its Intelligent Cloud business grew 26% to $29.9bn. This was driven by 27% revenue growth in its server products and cloud services, and Azure and other cloud services revenue, which posted growth of 39%.
When asked about demand for the Microsoft Azure cloud, CEO Satya Nadella referenced the company’s recent win with Nestlé, which is moving its SAP system from on-premise to the Azure public cloud. Nestlé migrated six ageing, regionally distributed on-premise datacentres to the Microsoft cloud platform, deploying Rise with SAP on Azure to unify and modernise its SAP landscape.
He described the migration as “a classic example”, which, according to Nadella, is a pretty healthy business, and is likely to grow even more. “It turns out that we’re still not anywhere close to the finish line,” he added.
Nadella predicted that only half of such on-premise to public cloud migrations have yet to be completed.
The other growth area for the Azure business is deploying workloads for cloud native computing. “These are scaling in a big way,” he said.
With some of these deployments, Nadella said organisations are moving to Azure for its AI capabilities. “These all build on each other, which is what’s driving our growth,” he added.
Looking at how Microsoft sees the monetisation of AI, Nadella spoke about the relationship between the technology and demand for greater computational power. “If you even subscribe to the point of view that intelligence is basically lots of compute, that means compute is going to grow, and you’ve got to use it as efficiently as possible to just keep creating intelligence,” he said.
Nadella pointed out that AI uses data layers and application servers, which have to be deployed on IT infrastructure. He expects these will need to grow by an order of magnitude. Then, there is the storage and compute requirements of AI-accelerated graphics processing units (GPUs). “The other thing we track is that every GPU requires storage and compute,” he added.
The quarterly results were published just before the Competition and Markets Authority (CMA) regulator in the UK published its final report looking at competition in the public cloud market.
The CMA reported that Microsoft’s licensing practices have the effect of reducing competition in cloud services markets by adversely impacting the competitiveness of AWS and Google in the supply of cloud services.
“These licensing practices are a feature that, in combination with the other features we have identified, including Microsoft’s large and increasing market share in these markets, further restricts the already limited choice and attractiveness of alternative products and suppliers,” the CMA said.
