Microsoft surpassed analyst expectations in its third-quarter results for fiscal year 2025 (Q3 FY25), reporting continued growth across its cloud and AI platforms. This marked the fourth consecutive quarter in which Redmond exceeded Wall Street forecasts, underscoring the growing role of AI in driving technology sector performance.
For the quarter ending 31 March 2025, Microsoft reported revenue of $70.1bn, up 13% year-on-year. Net income rose by 18% to $25.8bn, while diluted earnings per share reached $3.46. Operating income increased by 16% to $32bn. The company attributed its performance to rising demand for AI-based solutions and continued enterprise adoption of cloud infrastructure.
The Intelligent Cloud segment, which includes Azure, recorded revenue of $26.8bn, representing 21% year-on-year growth. Azure and other cloud services posted a 33% increase, with 16% points of that growth attributed to AI services. Total Microsoft Cloud revenue rose by 20% to $42.4bn.
“Cloud and AI are the essential inputs for every business to expand output, reduce costs, and accelerate growth,” said Microsoft chairman and CEO Satya Nadella. “From AI infra and platforms to apps, we are innovating across the stack to deliver for our customers.”
While the results affirmed the commercial uptake of generative AI, analysts noted that current momentum is largely driven by accelerated investment cycles, elevated capital expenditure, and growing interest in foundational models. Microsoft’s capital expenditure rose by 53% during the quarter, with plans to invest up to $80bn in fiscal 2025 to support its expanding AI and cloud infrastructure footprint.
The company’s performance, following similar results from Alphabet, helped ease concerns over a potential cooling in enterprise AI demand. Broader macroeconomic risks, including the effects of new US tariffs on capital spending, had also raised caution. However, resilient cloud revenues at Microsoft and strong advertising results at Meta Platforms suggest that enterprise investment in AI and digital services remains firm, as per a report in Reuters.
Microsoft has continued to frame its AI strategy as integral to future industrial and technological competitiveness. The company has expanded partnerships beyond OpenAI and integrated generative models across multiple product categories, including productivity tools, developer platforms, and search infrastructure.
AI growth outlook and investor response
Despite questions around the long-term trajectory of AI-driven growth, Microsoft has maintained its guidance. The company forecasted Azure revenue growth of 34% to 35% in the upcoming quarter, with AI continuing to contribute a significant share of that expansion.
Following the earnings release, Microsoft shares rose more than 7% in after-hours trading, reflecting investor confidence in the company’s AI-led roadmap.
In March, reports indicated that Microsoft had halted several planned data centre projects across the US and Europe, totalling around 2 gigawatts (GW) of capacity, over a six-month period. The decision, according to analysts cited by Reuters, reflected revised infrastructure demand forecasts and an oversupply of capacity relative to short-term needs.
Read more: Microsoft halts certain data centre projects in US and Europe amid surplus concerns
