Microsoft (NASDAQ: MSFT) stock grew by almost seven percent in pre-market trading after posting stronger-than-expected figures for Q3 2025 earnings of $3.46 EPS on $70 billion revenue, compared to Wall Street estimates of $3.21 EPS on $68.4 billion revenue. The surge is notable, given the controversies surrounding the company’s AI capabilities.
Amy Hood, Microsoft EVP & CFO,
“We delivered a strong quarter with Microsoft Cloud revenue of $42.4 billion, up 20% year-over-year, driven by continued demand for our differentiated offerings,”
Azure & AI Remain Core Growth Drivers
Microsoft’s commercial cloud business was a standout performer. Analysts expected it to reach $42.2 billion, however, Microsoft surpassed expectations and clocked in at $42.4 billion. Microsoft’s revenue from Azure and Intelligent Cloud also grew significantly, with them earning $26.8 billion, adding fuel to the fire with Microsoft’s growth.
Microsoft’s AI services have claimed a substantial part of these earnings too, driving 16 percentage points of additional revenue on Azure, leaving analysts stunned who only predicted 15.6 points. Additionally, Microsoft stated that the surge in capacity was due to the high number of new servers being deployed, however, Microsoft isn’t out of the woods yet, with many of these constraints being significant headwinds.
Segment Breakdown
- Productivity and Business Processes: $29.9 billion (vs. $29.6B expected)
- Intelligent Cloud (Azure): $26.8 billion
- More Personal Computing: $13.4 billion (vs. $12.6B expected), includes Windows, Xbox, and Bing
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AI Expansion Slows Amid Capacity Strains
Microsoft’s More Personal Computing segment outperformed despite a tough PC market, buoyed by demand in its gaming and search verticals.
The company has reported substantial growth in AI revenue, and recently, Microsoft has chosen to scale back on its early-stage AI infrastructure building projects. Noelle Walsh, President of Microsoft Cloud Operations and Innovation, has updated her LinkedIn, stating that the firm is “slowing or pausing some early-stage projects.” This comes when Microsoft is struggling with capacity constraints within its AI Data Centers.
Providing additional context in February, Cowen’s analyst Michael Elias speculated that Microsoft is quietly pulling out of some data center leases, showing that the firm is selective with its infrastructure spending.
Outlook: Positive Momentum Amid Strategic Adjustments
Regardless of the near-term limitations, Microsoft continues to have a long-term vision set on AI and has not altered the core of its strategy. With the increase in demand for cloud storage and services integrating AI into their systems, it places Microsoft is in a good position as an enterprise tech leader if it can effectively navigate through the infrastructure constraints.
Key Stats at a Glance:
| Metric | Q3 2025 Result | Est. | Q3 2024 |
|---|---|---|---|
| Revenue | $70B | $68.4B | $61.8B |
| EPS | $3.46 | $3.21 | $2.94 |
| Cloud Revenue | $42.4B | $42.2B | $35.1B |
| Azure AI Growth | +16 pts | 15.6 pts | N/A |
Final Words
Microsoft has had yet another strong quarterly performance, which has proven their strategy around cloud computing and AI to be a success, sustaining growth along the company’s operating system. The market shares increase in value further demonstrate the confidence investors have in the firm, while it pulls back the pace of AI spending, incorporating a more cautious approach during the capacity boundary challenges.
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