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Microsoft and Apple make money in different ways: Microsoft sells cloud services, software and business applications across a broad set of markets, while Apple’s sales remain led by iPhone, with Services as a substantial second business. Their FY2025 results offer a dated comparison of scale and business mix—not a current valuation or a buy-or-sell verdict.
How do Microsoft and Apple make money?
Microsoft: cloud, software and a broad product portfolio
Microsoft reports three segments in its FY2025 Annual Report: Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. Together, these cover products and services such as productivity and business applications, LinkedIn, Dynamics, cloud computing and server software, Windows, gaming, devices and advertising. Microsoft identifies cloud and AI as important areas for growth and investment.
That portfolio gives Microsoft revenue sources across commercial and consumer markets. The company’s reported categories suggest a broader mix than Apple’s, although cloud and AI infrastructure are increasingly important to Microsoft’s growth and margin story.
Apple: devices and Services
Apple sells iPhone, Mac, iPad, and Wearables, Home and Accessories, alongside Services. In Apple’s FY2025 statements, iPhone was its largest sales category and Services its second-largest. The mix means Apple has more than hardware sales, but its results remain closely connected to consumer device demand and the iPhone product cycle.
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The contrast is not simply “subscriptions versus devices.” Microsoft also sells products and devices, and Apple also earns Services revenue. The important distinction is where each company’s reported sales are concentrated and what must go right for those sales to grow.
What do their FY2025 results show?
These figures use each company’s fiscal year, not a shared calendar year: Microsoft FY2025 ended June 30, 2025; Apple FY2025 ended September 27, 2025. Microsoft’s FY2026 Form 10-K has since been filed, so the Microsoft FY2025 figures below are not its latest annual results as of October 7, 2026. They provide a dated common-year comparison; they should not be read as a current valuation comparison.
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| Measure | Microsoft FY2025 | Apple FY2025 |
|---|---|---|
| Fiscal year ended | June 30, 2025 | September 27, 2025 |
| Total revenue or net sales | Revenue: $281.724 billion | Net sales: $416.161 billion |
| Reported profit measure | Operating income: $128.528 billion | Net income: $112.010 billion |
| Reported business-line measure | Microsoft Cloud revenue: $168.9 billion; Azure and other cloud services revenue grew 34% | iPhone net sales: $209.586 billion; Services net sales: $109.158 billion |
All figures are from the companies’ FY2025 filings: Microsoft Corporation’s FY2025 Annual Report and Apple Inc.’s FY2025 statements. The profit figures are different measures: operating income is before certain expenses and taxes, while net income is after them. They are not a like-for-like profit comparison. Revenue and sales totals also do not, by themselves, show which stock is more attractive; that would require current share prices, expectations and valuation measures.
How do the companies’ risks differ?
Microsoft: investment, competition and infrastructure
- Cloud and AI spending: Microsoft says investment in cloud and AI infrastructure can raise operating costs and reduce margins. Its FY2025 Annual Report also describes pressure on Microsoft Cloud gross margin associated with scaling AI infrastructure. Growth in these services therefore needs to be considered alongside the cost of building and operating capacity.
- Competition and customer choice: Microsoft’s software, device and cloud markets are competitive, and the company identifies changing customer preferences and technologies as risks.
- Regulation: Microsoft’s FY2025 Form 10-K discusses competition enforcement and emerging AI laws, which could bring additional costs or operational effects.
- Trade and infrastructure exposure: The Form 10-K identifies trade restrictions, tariffs and export controls, as well as the land, energy, networking and computing components needed to expand data-center capacity. Constraints in any of these areas can affect the pace or cost of expansion.
Apple: product mix, supply chain and rules
- Dependence on the product cycle: iPhone was Apple’s largest FY2025 sales category. The implication—that a weaker upgrade cycle, changing preferences or competition could weigh on results—is an inference from that mix and Apple’s stated competitive risks, not a quantified forecast.
- Manufacturing concentration: Apple’s FY2025 Form 10-K says a significant majority of its manufacturing is performed in whole or in part by outsourcing partners, with a large concentration in Asian countries. Disruptions affecting partners or regions could affect production and availability.
- Tariffs and trade restrictions: Apple says tariffs and other restrictions may increase costs, constrain components or product availability, require operational changes, or affect pricing and margins. Conditions can change after the filing.
- Regulation and legal matters: Apple identifies antitrust, privacy, digital-platform, AI and other evolving rules as relevant to its global business. Changes in rules or legal outcomes could affect how products and services are offered or monetized.
Both companies face competition, regulation and exposure to trade or geopolitical changes, but the filings do not quantify a common probability or financial impact for these risks. Judging which matters more to an investor is an assessment, not a forecast established by the disclosures.
What should investors compare before looking at valuation?
A business comparison can help identify what to investigate, but it cannot determine whether either stock is attractively priced. Useful questions include:
- Revenue mix and concentration: How much depends on iPhone and other devices, versus Microsoft’s cloud, productivity software, subscriptions and advertising?
- Growth and profitability: Which reported business lines are growing, and how are operating income and margins changing as Microsoft expands infrastructure or Apple sells across its product and Services categories?
- Revenue patterns: How do subscriptions and cloud consumption compare with periodic hardware purchases in each company’s reported mix?
- Investment needs: What spending is needed to build data centers and AI services, or to develop, manufacture and support devices?
- Geography and supply chains: How might trade restrictions, geopolitical events, manufacturing partners or local regulation affect sales, production and infrastructure?
- Competition and regulation: Could antitrust, AI or platform rules—or changes in customer choice—alter product economics or access to customers?
Microsoft’s FY2025 shareholder letter described the company as being “in the midst of the AI platform shift.” That framing helps explain why AI and cloud investment feature prominently in Microsoft’s business outlook; it does not establish how profitable those investments will be or how they are reflected in the stock price.
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What this comparison can—and cannot—tell you about the stocks
The filings establish the companies’ reported businesses, FY2025 results and categories of risk. They support a comparison of revenue mix and business exposures, not a current ranking of stock value. No share prices, market capitalizations, valuation multiples or relative stock returns are included here, and Microsoft’s FY2026 filing is not analyzed in detail. A stock decision would also require current financial statements, market expectations, valuation data and consideration of the investor’s own time horizon and risk tolerance.
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