Microsoft CEO Satya Nadella speaks at an event commemorating the fiftieth anniversary of the corporate at Microsoft headquarters in Redmond, Washington, on April 4, 2025.
David Ryder
Microsoft shares rose about 9% in prolonged trading on Wednesday after the corporate reported better-than-expected quarterly results, driven by its Azure cloud business, and issued surprisingly strong guidance
Here’s how the corporate performed compared with LSEG consensus:
- Earnings per share: $3.46 vs. $3.22 expected
- Revenue: $70.07 billion vs. $68.42 billion expected
Microsoft called for revenue within the range of $73.15 billion to $74.25 billion. The center of the range was higher than LSEG’s $72.26 billion consensus. The corporate sees 34% to 35% in Azure growth at constant currency, compared with StreetAccount’s 31.5% consensus.
Management reiterated that capital expenditures will grow in the brand new fiscal 12 months, though at a slower rate than the present 2025 fiscal 12 months. The corporate’s implied operating margin of 43.35% was just shy of StreetAccount’s 43.5% consensus.
Revenue increased 13% 12 months over 12 months within the fiscal third quarter, which ended on March 31, based on a statement. Net income climbed 18% to $25.8 billion from $21.9 billion, or $2.94 per share, a 12 months earlier.
While earnings and revenue topped estimates, those results are backward looking. President Donald Trump’s sweeping tariffs were announced in early April, so the corporate’s optimistic forecast provided some relief to investors who’ve been concerned about how tech businesses will fare the rest of the 12 months.
CEO Satya Nadella said earlier this 12 months that Microsoft plans to spend $80 billion in fiscal 2025 on construction of information centers that may handle artificial intelligence workloads. That requires hefty imports from overseas, meaning costs could rise depending on where tariffs land.
Microsoft continued to take a position heavily in AI infrastructure through the quarter. Capital expenditures, excluding finance leases, reached $16.75 billion, up nearly 53%. Analysts surveyed by Visible Alpha had expected $16.37 billion.
The corporate’s Azure revenue grew 33%, with 16 points of the expansion related to AI. Analysts polled by StreetAccount and CNBC had anticipated 30.3% and 29.7% growth, respectively.
In January, Microsoft flagged disappointing non-AI Azure cloud execution with clients it engages alongside partners. Microsoft saw some improvement in these efforts during this quarter, said Amy Hood, Microsoft’s finance chief, on a conference call with analysts. “Things were a little bit higher, and we still have some work to do in our scale motions and we’re encouraged by our progress,” she said.
Meanwhile, in AI, Microsoft brought infrastructure capability online faster than expected, Hood said.
“Demand is growing a bit faster,” she said. “Due to this fact, we now expect to have some AI capability constraints beyond June.”
The Intelligent Cloud unit that features Azure produced $26.75 billion in revenue, up around 21% and greater than StreetAccount’s consensus of $26.16 billion.
Microsoft said greater than 15 million people are actually using its GitHub Copilot assistant, 4 times greater than last 12 months, Nadella said on Wednesday’s call.
Revenue within the Productivity and Business Processes segment, which comprises Office software subscriptions and LinkedIn, rose 10% to $29.94 billion, beating the $29.57 billion StreetAccount consensus. LinkedIn’s Talent Solutions offering for recruiters “continues to be impacted by weakness within the hiring market,” Hood said.
Within the More Personal Computing unit, containing Windows, search promoting, devices and video game consoles, revenue rose 6% to $13.37 billion, higher than StreetAccount’s $12.66 billion consensus.
Microsoft said sales of devices and of Windows operating licenses to device makers increased 3%, as inventory levels remained elevated due to tariff uncertainty. Technology industry researcher Gartner estimated that PC shipments went up 4.8% within the quarter.
“We proceed to see increased business traction as we approach end of support for Windows 10,” Nadella said. Support for the operating system introduced in 2015 will end in October. Deployments of the next-generation Windows 11 amongst business clients were up around 75%, he said.
Throughout the quarter, which ended on March 31, Microsoft announced an adjustment to its relationship with key AI partner OpenAI. The corporate said it could have a right of first refusal when OpenAI wants latest computing capability, but won’t at all times need to deliver it. On the identical day, OpenAI announced the Stargate AI infrastructure project alongside Oracle and SoftBank on the White House.
Microsoft said it had $623 million in “other expense” through the quarter. The sum includes recognized losses on equity method investments, including OpenAI. The figure was $2.29 billion within the prior quarter.
As of Wednesday’s close, Microsoft shares were down 7% for the 12 months, while the S&P 500 index was down about 6%.
WATCH: Trade Tracker: Karen Firestone buys more Microsoft
