Microsoft Surpasses Expectations with 13% Earnings Jump to $70.1 Billion

Microsoft’s share price skyrocketed by more than 8%, more than analysts expected.

Technology conglomerate Microsoft reported good quarterly earnings on Wednesday, with income up 13% to $70.1 billion.

The company’s cloud computing and artificial intelligence (AI) businesses performed well.

After hours of trading, Microsoft’s share prices skyrocketed by more than 8%, more than analysts expected. The increase in its shares increases its value by over $200 billion.

Investors have been concerned about the effects of the sweeping US tariffs, which were forcing the company to cut back on its spending, but strong advertising sales at Meta Platforms indicated that this is not yet the case.

According to Visible Alpha, a financial analyst company, Azure cloud division income increased 33% in the third quarter compared to the estimate of 29.7%. The increase was due to AI, which increased by 16% from 13% the quarter before.

The company predicted that cloud computing sales would expand by 34% to 35% in the fiscal fourth quarter, reaching between $28.75 billion and $29.05 billion, significantly higher than analysts predicted.

A new Azure contract with ChatGPT creator OpenAI was one of the factors that led to an 18% increase in commercial bookings growth in the fiscal third quarter, reflecting new infrastructure and software contracts signed by business clients. Microsoft declined to comment regarding the contract size and its contribution to the development of overall Azure sales.  

Microsoft’s chief financial officer, Amy Hood, told investors that the AI contribution to the cloud computing business was what the company expected, though the true outperformance in Azure this quarter was in their non-AI division.

Additionally, Hood added that one more upside is that their AI division allowed them to deliver supplies ahead of schedule to some customers.

This good news came after many Wall Street analysts lowered their expectations after reports that Microsoft terminated some data center lease commitments.

CEO Satya Nadella stated that although Microsoft has a long history of constantly changing its data center plans, analysts have only recently started to pay close attention to such changes.

They had much leeway to beat because the numbers were skeptical before they arrived. Regarding tariff uncertainties, Dan Morgan, senior portfolio manager at Synovus Trust, stated that Microsoft would not have an increase in their forecasts if they had faced any significant issues.

Microsoft exceeded forecasts of $3.22 per share with a quarterly profit worth $3.46 per share.

The Intelligent Cloud unit, which contains Azure, brought in $26.8 billion, which was part of the 13% increase in income to $70.1 billion.

Microsoft’s capital expenditure increased by 53% to $21.4 billion in the third quarter, but the share of longer-lived asset expenditure decreased to around half the total.

Hood informed investors that the company’s capital expenditure will continue to increase in the fiscal year 2026, which starts in July, but at a slower rate than in the current year and with a greater focus on assets with a shorter lifespan.

Jonathan Neilson, Microsoft’s vice president of investor relations, stated that this shows that now the company wants to spend on assets like processors instead of assets like data center buildings.

Neilson mentioned chips from companies like Nvidia, Advanced Micro Devices, and Intel, saying to invest money in CPUs and GPUs and then see the company minting money.

Microsoft, which has stated time and time again that its AI capabilities are limited, is now investing billions of dollars in developing its AI infrastructure and growing its data center footprint.

If Big Tech decides to cut back on its AI expenditures, then the future of the US economy and companies like semiconductor Nvidia will be long gone. Analysts at J.P. Morgan predicted in January that data center expenditures may boost US economic growth by 10 to 20 basis points in 2025–2026.