Microsoft stock rises 9% following strong earnings, revenue surpassing expectations, and an improved outlook.

Microsoft CEO Satya Nadella speaks at an event commemorating the 50th anniversary of the company at Microsoft headquarters in Redmond, Washington, on April 4, 2025. David Ryder

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 anticipates 34% to 35% growth in Azure at constant currency, compared with StreetAccount’s 31.5% consensus.

Management reiterated that capital expenditures will grow in the new fiscal year, although 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 surpassed 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 for the remainder of the year.

CEO Satya Nadella mentioned earlier this year that Microsoft plans to spend $80 billion in fiscal 2025 on constructing data centers capable of handling artificial intelligence workloads. This requires substantial 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 attributed to AI. Analysts polled by StreetAccount and CNBC had anticipated 30.3% and 29.7% growth, respectively. In January, Microsoft highlighted 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, but we’re encouraged by our progress,” she said.

Meanwhile, in AI, Microsoft brought infrastructure capacity online faster than expected, according to Hood. The Intelligent Cloud unit, which includes Azure, generated $26.75 billion in revenue, up around 21% and more than StreetAccount’s consensus of $26.16 billion.

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

Revenue in the Productivity and Business Processes segment, which includes 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 noted.

In the More Personal Computing unit, which comprises Windows, search advertising, devices, and video game consoles, revenue rose 6% to $13.37 billion, higher than StreetAccount’s $12.66 billion consensus. Microsoft reported that sales of devices and 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% in the quarter.

“We continue to see increased commercial traction as we approach the 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 added.

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

Microsoft reported $623 million in “other expense” during the quarter, which includes recognized losses on equity method investments, including OpenAI. The figure was $2.29 billion in the prior quarter.

As of Wednesday’s close, Microsoft shares were down 7% for the year, while the S&P 500 index was down about 6%.

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