Microsoft (MSFT) Q3 earnings report 2025

Microsoft shares rose about 9% in extended trading on Wednesday after the company reported better-than-expected quarterly results, driven by its Azure cloud business, and issued surprisingly strong guidance

Here’s how the company performed in comparison 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 in the range of $73.15 billion to $74.25 billion. The middle of the range was higher than LSEG’s $72.26 billion consensus. The company 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 new fiscal year, though at a slower rate than the current 2025 fiscal year. The company’s implied operating margin of 43.35% was just shy of StreetAccount’s 43.5% consensus.

Revenue increased 13% year over year in the fiscal third quarter, which ended on March 31, according to a statement. Net income climbed 18% to $25.8 billion from $21.9 billion, or $2.94 per share, a year 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 company’s optimistic forecast provided some relief to investors who have been concerned about how tech businesses will fare the remainder of the year.

CEO Satya Nadella said earlier this year that Microsoft plans to spend $80 billion in fiscal 2025 on construction of data centers that can handle artificial intelligence workloads. That requires hefty imports from overseas, meaning costs could rise depending on where tariffs land.

Microsoft continued to invest heavily in AI infrastructure during 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 company’s Azure revenue grew 33%, with 16 points of the growth associated with 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 better, 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 capacity online faster than expected, Hood said.

“Demand is growing a bit faster,” she said. “Therefore, we now expect to have some AI capacity constraints beyond June.”

The Intelligent Cloud unit that includes Azure produced $26.75 billion in revenue, up around 21% and more than StreetAccount’s consensus of $26.16 billion.

Microsoft said more than 15 million people are now using its GitHub Copilot assistant, four times more than last year, Nadella said on Wednesday’s call.

Revenue in the Productivity and Business Processes segment, which contains 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 in the hiring market,” Hood said.

In the More Personal Computing unit, containing Windows, search advertising, 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 because of tariff uncertainty. Technology industry researcher Gartner estimated that PC shipments went up 4.8% in the quarter.

“We continue to see increased commercial 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 among commercial clients were up around 75%, he said.

During the quarter, which ended on March 31, Microsoft announced an adjustment to its relationship with key AI partner OpenAI. The company said it would have a right of first refusal when OpenAI wants new computing capacity, but won’t always have to deliver it. On the same day, OpenAI announced the Stargate AI infrastructure project alongside Oracle and SoftBank at the White House.

Microsoft said it had $623 million in “other expense” during the quarter. The sum includes recognized losses on equity method investments, including OpenAI. The…