Biochar is an effective material for enhancing soil ecosystem services. However, the specific impacts of biochar on microbial indicators, particularly in degraded soils, remain poorly understood. This study aimed to evaluate the effects of biochar produced from cashew residues and sewage sludge, in a highly degraded soil, on microbial indicators. We analyzed soil chemical composition and microbial biomass C and N, enzyme activity, and stoichiometry. Cashew biochar increased soil respiration, indicating a higher availability of C to microorganisms compared to sewage sludge biochar and a better adaptation of soil microbial communities to C-rich organic material obtained from a native plant. Although the biochar differentially impacted microbial biomass C, both significantly increased N in the microbial biomass. Arylsulphatase activity did not respond to biochar application, while β-glucosidase, urease, and phosphatases showed significant changes with biochar treatments. Importantly, stoichiometry and vector analysis revealed that both types of biochar increased P limitation for soil microbes. Conversely, both biochar alleviated C and N limitations for the soil microbes. Thus, biochar applications in highly degraded soils should be supplemented with external P sources to maintain soil functions, mainly for cashew residues. Our results provide evidence that biochar can restore soil biological properties and enhance the availability of C and N to microorganisms. These findings have significant implications for restoration practices in degraded lands of semiarid regions.