Microsoft capped off its fiscal year with financial results that surpassed even the loftiest analyst expectations, signaling not only the company’s enduring dominance across multiple tech sectors, but also highlighting the transformative power—and deep cost—of its investments in artificial intelligence. This quarterly and annual report came amid a swirl of landmark product announcements, strategic rethinks in the Windows division, and a shifting vision for where both the operating system and company are headed by 2030. Against the backdrop of stunning revenue and profit growth, however, lingered the specter of significant workforce reductions, as more than 17,000 jobs were cut in 2025 despite record profits. Now, with the company boasting a market cap north of $4 trillion and the AI conversation front and center, it’s clear Microsoft stands poised to reshape digital work and play for hundreds of millions of users worldwide.
Microsoft has entered a new era, solidifying its lead in cloud dominance, artificial intelligence adoption, and gaming influence, while reaffirming its centrality to the corporate tech stack. In the most recent earnings report, Microsoft posted a net income of $27.2 billion on revenues of $76.4 billion for the quarter, representing year-over-year surges of 24% and 18%, respectively. Full-year results were similarly robust, with a net income of $101.8 billion (up 16%) on $281.7 billion in revenue (up 15%).
Yet, these record financials revealed more than just headline growth. For the first time, Microsoft broke out detailed numbers around Azure, its AI investments, and its surging gaming business, signaling newfound transparency as analysts seek clarity on just how the company’s big bets are paying off. With Azure posting $75 billion in annual revenue and AI spend in the last fiscal year hitting $85 billion—both well above previous guidance—it’s clear that Satya Nadella’s “AI-first” ambitions are being matched by unprecedented financial commitments and expectations. Notably, the current quarter alone is projected to include $30 billion in AI-related expenditures.
Still, the good news for Wall Street was tempered by ongoing anxiety among employees. With over 17,000 layoffs this calendar year, Microsoft’s reported headcount was left essentially unchanged year-over-year, highlighting an intense ongoing drive for efficiency despite headline-grabbing profits.
This investment is poised only to deepen. For the current quarter, Microsoft anticipates $30 billion in AI investment—an astounding amount that underscores just how much pressure there is for Copilot, Azure OpenAI services, and related products to deliver tangible value. This is not just spending for its own sake. AI is now central to product roadmaps across almost every Microsoft business, from Windows to GitHub to Xbox.
There’s been some skepticism around this figure, as the metric encompasses anyone with access to Copilot features in M365. Still, the momentum is undeniable. GitHub Copilot also boasts over 20 million MAUs, though a substantial number reportedly access it via free licenses, raising questions about the direct monetization pathway. Regardless, the breadth of adoption is a testament to Microsoft’s holistic approach: AI is not confined to experimental products, but infused throughout the modern work stack.
Windows’ journey is being reimagined around three central themes:
Key performance metrics further illustrate this progress:
The company continues to expand the Game Pass catalog, with soon-to-launch additions like Assassin’s Creed Mirage. Even legacy issues like supply chain tariffs, which have driven up costs for OG Nintendo Switch models, are being closely watched in the competitive landscape.
Leadership maintains that overall headcount has remained steady, as new roles are created in cloud, AI, and product teams even as others are cut. Nonetheless, the stark contrast between bumper profits and mass layoffs has not gone unnoticed, both inside Redmond and among investors.
The timing of several high-profile product launches and “vision” announcements so closely aligned with layoff waves has raised questions about strategic messaging. Critics suggest these headline-grabbing events were, in part, designed to deflect attention from ongoing job cuts and reframe the company’s narrative around innovation, not austerity.
Meanwhile, Apple’s accelerating efforts in generative AI and the integration of technologies akin to ChatGPT into Siri and other products underscores the competitive landscape. Amazon’s Alexa platform is also evolving, with reports of advertising-supported models on the horizon. Microsoft, for its part, is acutely aware of these dynamics and is betting that Copilot’s deep integration and enterprise credibility will set it apart.
Microsoft’s ambitions around AI-powered workflows and productivity cannot be fully realized if legacy application silos, performance challenges, and inconsistent UI paradigms persist. Industry observers widely agree: for Windows to achieve its “vision 2030” promise, revitalizing its application ecosystem is not optional. Genuine progress in this area could unlock massive user value as AI increasingly mediates between users and their most important work.
Microsoft recognizes that trust—built through security, transparency, and reliability—will be essential to its continued dominance. As threats multiply and threat actors grow more sophisticated, proactive and adaptive security, enabled by AI models running both locally and in the cloud, is poised to become a signature advantage.
Source: Thurrott.com Windows Weekly 944: Shakin' the Treats
Overview
Microsoft has entered a new era, solidifying its lead in cloud dominance, artificial intelligence adoption, and gaming influence, while reaffirming its centrality to the corporate tech stack. In the most recent earnings report, Microsoft posted a net income of $27.2 billion on revenues of $76.4 billion for the quarter, representing year-over-year surges of 24% and 18%, respectively. Full-year results were similarly robust, with a net income of $101.8 billion (up 16%) on $281.7 billion in revenue (up 15%).Yet, these record financials revealed more than just headline growth. For the first time, Microsoft broke out detailed numbers around Azure, its AI investments, and its surging gaming business, signaling newfound transparency as analysts seek clarity on just how the company’s big bets are paying off. With Azure posting $75 billion in annual revenue and AI spend in the last fiscal year hitting $85 billion—both well above previous guidance—it’s clear that Satya Nadella’s “AI-first” ambitions are being matched by unprecedented financial commitments and expectations. Notably, the current quarter alone is projected to include $30 billion in AI-related expenditures.
Still, the good news for Wall Street was tempered by ongoing anxiety among employees. With over 17,000 layoffs this calendar year, Microsoft’s reported headcount was left essentially unchanged year-over-year, highlighting an intense ongoing drive for efficiency despite headline-grabbing profits.
Microsoft’s AI Moonshot: Investment and Usage at Scale
AI Spending Breaks Records
One of the most significant takeaways from the latest results is the sheer magnitude of Microsoft’s AI investment. The company spent approximately $85 billion on AI in FY25—far outpacing public forecasts and even most analyst projections. This figure covers everything from OpenAI partnerships to the cost of custom silicon, as well as the frenetic build-out of cloud infrastructure required to power advanced enterprise and consumer Copilot deployments.This investment is poised only to deepen. For the current quarter, Microsoft anticipates $30 billion in AI investment—an astounding amount that underscores just how much pressure there is for Copilot, Azure OpenAI services, and related products to deliver tangible value. This is not just spending for its own sake. AI is now central to product roadmaps across almost every Microsoft business, from Windows to GitHub to Xbox.
Copilot: A New Productivity Tier
Copilot has quickly emerged as the flagship for Microsoft’s generative AI ambitions. The company reports over 100 million monthly active users (MAUs) for Copilot, though the term here largely refers to its full integration within Microsoft 365—effectively positioning Copilot as a premium, AI-augmented tier of the company’s productivity suite.There’s been some skepticism around this figure, as the metric encompasses anyone with access to Copilot features in M365. Still, the momentum is undeniable. GitHub Copilot also boasts over 20 million MAUs, though a substantial number reportedly access it via free licenses, raising questions about the direct monetization pathway. Regardless, the breadth of adoption is a testament to Microsoft’s holistic approach: AI is not confined to experimental products, but infused throughout the modern work stack.
Azure: Transparency and Scale
For the first time, Microsoft disclosed that Azure generated $75 billion in annual revenues, up from an estimated $56 billion in the prior year. This newfound transparency signals not only the division’s maturation, but also its centrality to the company’s AI-centric growth strategy. Azure, along with partner OpenAI initiatives, fuels the bandwidth and scalability required for Copilot’s vast reach, AI-powered security, and next-generation app experiences now running inside Windows and elsewhere.Windows Vision 2030: Where the World is Headed
A Strategic Shift in Focus
In a bold departure from routine feature announcements, Microsoft recently published a “vision video” for Windows, offering a tantalizing look at its projected role in daily life by 2030. Leading the charge: David Weston, a security architect—a fitting but unconventional choice as the public face of the operating system’s future.Windows’ journey is being reimagined around three central themes:
- AI-Driven Productivity: Less repetitive toil, less tedious on-screen work, and more natural, voice-driven interactions.
- Multimodal, Multisensory Computing: Moving beyond the keyboard and mouse toward conversations, handwriting, and even gaze and gesture-based controls.
- “It Just Works” Security: In response to escalating threats and user demand for seamless protection, the vision emphasizes security as an automated, nearly invisible appliance.
The End of Windows 11 SE
As part of this evolution, Microsoft has confirmed the quiet discontinuation of Windows 11 SE. Originally marketed as a streamlined, cloud-first OS for education, Windows 11 SE never gained significant traction—underscoring the company’s need to focus on more broadly impactful operating system investments. Its passing is notable, if not surprising, characterizing Microsoft’s willingness to cull underperforming products to redirect resources toward transformative initiatives like Copilot and Windows Core.Gaming and Xbox: Massive Growth and Strategic Priorities
Monumental Gains
The past year represented a turning point for Microsoft’s gaming ambitions. Gaming now claims over 500 million monthly active users across Xbox, PC, and cloud, propelling Microsoft Gaming/Xbox to its most robust growth ever. Call of Duty alone has 50 million MAUs.Key performance metrics further illustrate this progress:
- Nearly 40 first-party games in development
- Xbox Game Pass revenue exceeding $5 billion in the fiscal year
- Over 500 million hours played via Game Pass in that same span
Gaming Copilot and New Experiences
The introduction of Gaming Copilot for Xbox Insiders on Windows PCs hints at broader ambitions. This AI assistant aims to streamline both gaming and system troubleshooting, offer in-game tips, and augment social experiences. Although still in beta, its mere presence demonstrates Microsoft’s intent to eventually make AI a central part of the gaming experience—mirroring the broader Windows and cloud strategies.The company continues to expand the Game Pass catalog, with soon-to-launch additions like Assassin’s Creed Mirage. Even legacy issues like supply chain tariffs, which have driven up costs for OG Nintendo Switch models, are being closely watched in the competitive landscape.
Earnings, Layoffs, and the Changing Face of Microsoft
Record Profits, Controversial Layoffs
Despite surging profits and explosive AI-fueled growth, 2025 has been marked by significant workforce reduction. More than 17,000 employees have lost their jobs, even as Microsoft reported more than $100 billion in net income for the year.Leadership maintains that overall headcount has remained steady, as new roles are created in cloud, AI, and product teams even as others are cut. Nonetheless, the stark contrast between bumper profits and mass layoffs has not gone unnoticed, both inside Redmond and among investors.
The timing of several high-profile product launches and “vision” announcements so closely aligned with layoff waves has raised questions about strategic messaging. Critics suggest these headline-grabbing events were, in part, designed to deflect attention from ongoing job cuts and reframe the company’s narrative around innovation, not austerity.
AI Development and Open Source Dynamics
Microsoft’s AI investment strategy is closely tied to its relationship with OpenAI. Notably, the recent disclosure of “open-weight” reasoning models marks a shift toward democratizing advanced AI—a move greeted with both enthusiasm and skepticism. On one hand, it empowers independent developers and smaller firms to build on world-class models for free; on the other, critics argue it may dilute Microsoft’s competitive advantage and, potentially, raise unresolved issues around IP and security.Meanwhile, Apple’s accelerating efforts in generative AI and the integration of technologies akin to ChatGPT into Siri and other products underscores the competitive landscape. Amazon’s Alexa platform is also evolving, with reports of advertising-supported models on the horizon. Microsoft, for its part, is acutely aware of these dynamics and is betting that Copilot’s deep integration and enterprise credibility will set it apart.
Developer and App Ecosystems: The Challenge Remains
Native Windows Apps and the Roadblocks
One area that remains a persistent pain point is the state of native application development on Windows. Despite improvements and steady investment in the Windows App SDK, developers still encounter obstacles when delivering polished, effective, and truly integrated experiences.Microsoft’s ambitions around AI-powered workflows and productivity cannot be fully realized if legacy application silos, performance challenges, and inconsistent UI paradigms persist. Industry observers widely agree: for Windows to achieve its “vision 2030” promise, revitalizing its application ecosystem is not optional. Genuine progress in this area could unlock massive user value as AI increasingly mediates between users and their most important work.
The Road Ahead for Windows: Transformation, Not Just Iteration
Adapting to a Multimodal World
Microsoft’s public messaging now looks beyond Windows as a traditional desktop OS toward a platform that is ambient, multimodal, and deeply integrated across endpoints, from smartphones and VR headsets to cloud-powered workstations. The rise of on-device AI silicon, context-aware experiences, and “as-a-service” security models all point toward an operating system that is less about windows, icons, and files, and more about empowerment and seamlessness.Security as a Differentiator
The Windows Vision 2030 initiative places special emphasis on security that “just works”—acknowledging that user frustration with complex, brittle protections is a key friction point. The end goal is an ecosystem where security is as invisible as it is effective, leveraging AI to anticipate, detect, and neutralize threats before they can impact users.Microsoft recognizes that trust—built through security, transparency, and reliability—will be essential to its continued dominance. As threats multiply and threat actors grow more sophisticated, proactive and adaptive security, enabled by AI models running both locally and in the cloud, is poised to become a signature advantage.
Tips, Tricks, and Tools for the Modern User
Assessing PC Performance: Winsat and Beyond
With the return of the Windows System Assessment Tool (Winsat), power users are encouraged to get deep visibility into their PC’s performance. By running a formal assessment from the command line (winsat formal), users can surface granular system metrics, echoing the classic Windows Experience Index from earlier Windows versions. Advanced users can navigate to%systemroot%\performance\winsat\datastore in File Explorer, open the latest XML file, and review the <WinSPR> section for component-level breakdowns.Essential App Picks: Proton Authenticator
Beyond Microsoft’s own security stack, third-party tools remain vital. Proton’s new standalone authenticator app is recommended for users seeking alternatives to platform-tied authenticators. However, many will still find Microsoft Authenticator indispensable for accounts with deep integration or advanced features—highlighting that, despite the influx of innovation, there’s rarely a one-size-fits-all solution for security.Conclusion
Microsoft’s latest financial, product, and strategy updates reinforce the company’s twin ambitions: to lead the next generation of digital work through AI, and to build a Windows experience that is ambient, adaptive, and secure. The data points to a company in robust health, yet still restless and willing to disrupt itself in the name of relevance. As AI spending and product integration continue to accelerate, challenges around culture, developer ecosystem health, and user trust remain. Still, by betting big on transformation—across cloud, gaming, productivity, and the very nature of its operating system—Microsoft is firmly shaping the future not just of Windows, but of how the world works and plays in the AI era.Source: Thurrott.com Windows Weekly 944: Shakin' the Treats
