Microsoft (MSFT) delivered a decisive beat in its fiscal third-quarter earnings, propelling the tech giant’s shares up more than 8% in Thursday trading.
Revenue climbed 13% year over year to a record $70.07 billion, outpacing analysts' expectations and cementing Microsoft’s leadership in cloud infrastructure and enterprise software.
Earnings per share came in at $3.46, handily beating Wall Street’s forecast of $3.22. Net income rose 18% to $25.8 billion, driven by robust cloud adoption and resurgent demand for AI-powered services.
At the heart of Microsoft’s performance was its Intelligent Cloud segment, which surged 21% to $26.8 billion. Azure, the company’s cloud computing platform, was the standout, growing 33%—or 35% in constant currency—on the back of accelerating enterprise demand and AI deployments. The figure easily topped guidance and marked a sharp rebound from the prior quarter’s slower pace.
“Cloud and AI are the essential inputs for every business,” said CEO Satya Nadella. The company attributed 16 percentage points of Azure’s growth directly to AI services, reflecting growing customer reliance on Microsoft's data infrastructure for generative AI workloads.
AI Demand Spurs Aggressive Forecasts, Calms Market Concerns
Microsoft didn’t just deliver on the quarter—it offered a bullish outlook for the months ahead. Management expects revenue in fiscal Q4 to land between $73.15 billion and $74.25 billion, implying 14% growth year over year. Azure’s growth is projected to remain strong at 34% to 35% in constant currency, while Intelligent Cloud revenue is forecast between $28.75 billion and $29.05 billion—both above consensus.
Analysts praised the performance, with Wedbush calling the quarter “an Aaron Judge-like performance,” referencing the Azure beat as the company’s largest in six quarters. Wedbush raised its price target to $515, citing Microsoft’s decisive response to concerns around AI capacity constraints and data center buildouts.
Though Microsoft had previously slowed or paused early-stage AI infrastructure projects and canceled some data center leases, the Q3 report made clear that demand is outpacing those cautious adjustments. The company reaffirmed its $80 billion capital expenditures plan for FY25 and said investments will continue to rise into FY26.
Operating margin hit 45.7%, up 108 basis points year over year, underscoring the efficiency of Microsoft’s hybrid AI-cloud strategy. While higher capex raised some eyebrows earlier in the year, the rapid conversion of infrastructure spending into top-line growth appears to have silenced most critics.
Enterprise Backbone in Productivity and Devices Adds to Strength
Beyond the cloud, Microsoft’s Productivity and Business Processes segment generated $29.9 billion in revenue, up 10% year over year. Microsoft 365 commercial products and Dynamics 365 led the way, with the latter growing 16%. The More Personal Computing division added $13.4 billion, a 6% increase, with Windows OEM and gaming demand holding steady despite macro uncertainty and persistent inventory imbalances.
LinkedIn contributed positively but faced ongoing headwinds from a soft hiring environment. Nevertheless, management noted steady demand signals across commercial businesses, search, and Xbox through April, giving additional confidence to its widened Q4 guidance.
While the broader tech sector grapples with geopolitical and macroeconomic concerns—including tariffs and constrained IT budgets—Microsoft continues to benefit from what analysts see as a "durable" position in enterprise stacks. As businesses race to embed AI into their operations, Microsoft’s full-stack approach—from infrastructure to productivity—has emerged as a winning formula.
With Azure firing on all cylinders, AI tailwinds accelerating, and forward guidance surpassing expectations, Microsoft has reasserted its role not only as a cloud leader, but as a foundational player in the next era of enterprise computing.
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