Microsoft Shares Leap Nearly 8% on Stronger Q3 Azure Cloud Revenue, Resilien...

TMTPOST -- Microsoft Corporation shares finished 7.6% higher on Thursday, driving the U.S. stock market benchmark S&P 500 higher for an eighth straight session. Shares leapt as the tech behemoth maintained stellar growth of artificial intelligence (AI)-powered cloud business and seems to be immune to the worldwide trade war.

Credit：Microsoft

Microsoft posted strong results across the board for third fiscal quarter ended March 31, 2025. Revenue jumped 13% year-over-year (YoY) to $70.07 billion, smashing Wall Street estimated $68.48 billion. That suggested sales accelerated from a 12% YoY increase three months ago, the slowest growth since the mid-2023. Diluted earnings per share (EPS) for the March quarter climbed 17.7% to $3.46, topping analysts’ projection, compared with the growth rate of 10% for the previous two quarters.

Microsoft cloud business, which is currently most evidently benefiting from generative AI applications, also beat analysts’ estimates. The commercial cloud brought $42.40 billion from January to March, representing a YoY surge of 20%. Analysts anticipated the segment recorded $42.20 billion of revenue. Microsoft Intelligent Cloud, which also includes the core cloud platform Azure, saw revenue gained 21% YoY to $26.75 billion, ahead of Wall Street estimate of $26.16 billion.

Revenue from Azure and other cloud services recorded a YoY increase of 33%, whereas analysts expected the unit would slow down with an increase of 29%. Eliminated the foreign exchange fluctuation, Azure revenue rose 35% YoY in constant currency, also above estimates. Azure growth included 16 percentage points from AI services, up from 13 points for the December quarter, also above expected 15.6 points. Microsoft attributed the jump in AI contribution to bringing more servers online to meet demand.

Microsoft provided stronger-than-anticipated guidance, signaling its resilience amid tariff uncertainty. It expected revenue for the fourth fiscal quarter to be between $73.15 billion to $74.25 billion, versus LSEG’s $72.26 billion consensus. Azure revenue is projected to grow by 34% to 35% in constant currency, compared with StreetAccount’s 31.5% consensus.

Microsoft Chief Financial Officer (CFO) Amy Hood said the commercial cloud revenue for the third fiscal quarter was driven by “continued demand for our differentiated offerings”. Hood told analysts the real outperformance in Azure for the March quarter was in non AI business. She said Microsoft continued to bring data center capacity online as planned, demand is growing a bit faster, so the company expected to have some AI capacity constraints beyond June.

Microsoft continued heavy investment in AI infrastructure, though it did scale back a little bit after acceleration over several quarters. Microsoft opened data centers in 10 countries across four continents, CEO Satya Nadella said on a conference call with analysts.

Captial expenditure, or Capex, including finance leases, came in at $21.4 billion for the third fiscal quarter, about $1 billion less than analyts’ expectation. That marked the first quarter-over-quarter decline in Capex in more than two years. Hood said the Capex was “slightly lower than expected due to normal variability from the timing of delivery of data center leases.” Excluding finance leases, the Capex soared nearly 53% YoY to $16.75 billion while analysts had estimated $16.37 billion.

Mcirsoft is on pace for Capex of more than $80 billion in its fiscal 2025 year, and said it plans to ramp up spending the current quarter. Though Hood confirmed the spending will grow at a slower pace later this year. Capex “will grow at a lower rate than FY 2025 and will include a greater mix of short-lived assets, which are more directly correlated to revenue than long-lived assets,” she said.

Raymond James analyst Andrew Marok said Microsoft’s latest quarterly report put to rest concerns about the company pausing its AI data center buildout. "Worries around AI demand following the reports of data center lease cancelations were calmed," Marok said in a note. "AI demand remains robust. So much so that the timeline for capacity/demand breakeven was pushed into early fiscal 2026 despite as-expected capacity growth."

On the earnings call, Microsoft management only mentioned the word “tariff” once. CEO Satya Nadella believed the company could help customers counter rising cost due to tariffs with its software, calling software “the most valuable resource we have to fight any type of inflationary pressure or any type of growth pressure, where you need to do more with less.”

“I think if you sort of buy into the argument that software is the most malleable resource we have to fight any type of inflationary pressure or any type of growth pressure where you need to do more with less, I think we can be super helpful in that,” he said. “And so if anything, we would probably have more of that mindset is, how do we make sure we are helping our customers, and then, of course, we’ll look to share gains.”