- Microsoft delivered better-than-expected results on the top and bottom lines.
- The company’s Azure cloud business exceeded analysts’ estimates.
- Wall Street will be focused on the company’s upcoming earnings call for a sense of how President Trump’s tariffs are impacting the business.
Microsoft shares rose more than 8% in extended trading on Wednesday after the company reported better-than-expected quarterly results driven by its Azure cloud business and strong quarterly 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
With respect to guidance, 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.
Microsoft’s revenue grew 13% year over year in the 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, and investors will be focused on commentary on the upcoming earnings call for a sense of their likely impact on results this quarter and for the rest of the year.
CEO Satya Nadella said earlier this year that Microsoft plans 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 substantially 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. Microsoft’s Intelligent Cloud unit that includes the Azure cloud 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 a conference call with analysts.
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,” said Amy Hood, Microsoft’s finance chief.
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 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%.
Executives will issue guidance and discuss the results on a call with analysts starting at 5:30 p.m. ET.
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