Microsoft just reminded everyone why it’s still one of the biggest names in tech. After a quarter packed with strong growth, especially in its Azure cloud business, the company left investors grinning and analysts scrambling to revise their projections.
Shares of Microsoft surged 7 percent (7%) after hours, casually adding more than 200 billion dollars to its market value. That’s right. In just a few hours, Microsoft added enough to buy entire corporations or, say, a small country or two.
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What’s all the excitement about?
It’s Azure. Microsoft’s cloud-computing platform is thriving, powered by artificial intelligence and good old-fashioned demand. In the third quarter ending March 31, Azure’s revenue jumped 33 percent, smashing past analyst expectations of around 29.7 percent.
Out of that, AI alone contributed a hefty 16 percentage points. Last quarter, AI made up 13 points of growth, so clearly, this train isn’t slowing down.
If that wasn’t enough to stir investor confidence, Microsoft went ahead and projected even stronger numbers for the next quarter. The company expects cloud-computing revenue growth of 34 to 35 percent on a constant currency basis, which lands revenue between 28.75 and 29.05 billion dollars. That’s well ahead of what analysts were betting on. It’s the corporate equivalent of raising your eyebrows and casually dropping a mic.
Commercial bookings, which track new contracts signed by business customers, grew by 18 percent. This surge was helped along by a fresh Azure deal with OpenAI, the ones who created ChatGPT. Microsoft didn’t spill the details on how much that contract is worth, but it clearly made a noticeable dent in the numbers.
Still, Microsoft’s CFO Amy Hood was quick to clarify that the big surprise came from the non-AI part of Azure. While AI delivered as expected, it was the rest of the business that outperformed.
According to her, the only unexpected upside in AI was the fact that they managed to deliver supplies early to a few customers. So, essentially, Microsoft turned in their homework ahead of schedule and still got bonus points.
All this comes after weeks of market jitters. Some analysts had started to think Microsoft was tightening the purse strings on AI infrastructure after reports showed the company backing out of some data center lease agreements.
This led to speculation that demand was tapering off. But it turns out, Microsoft was just doing what smart companies do: adjusting plans, shuffling priorities, and confusing everyone in the process.
CEO Satya Nadella, ever calm and composed, reassured investors that Microsoft has been rethinking and reshaping its data center plans for years. It’s just that recently, analysts started watching every move like hawks with calculators.
One analyst summed it up perfectly, saying expectations were so low going into the quarter that Microsoft had plenty of room to blow past them. It’s the corporate version of setting the bar on the floor and then somersaulting it.
Microsoft also reported a per-share profit of $3.46, which beat the expected $3.22. Total revenue grew 13 percent, hitting 70.1 billion dollars. Of that, the Intelligent Cloud division, which includes Azure, accounted for 26.8 billion. So yes, the cloud is doing a lot of the heavy lifting.
Now let’s talk spending. Capital expenditures shot up by 53 percent to 21.4 billion dollars this quarter. But interestingly, Microsoft is shifting away from long-term assets like big buildings and leaning more into shorter-lived items like chips.
That’s not just a budgeting quirk. According to investor relations VP Jonathan Neilson, when you plug in CPUs and GPUs, you can start recognizing revenue faster. Means, the faster you install the expensive stuff, the faster the money starts flowing.
Microsoft has been pouring billions into building out its AI infrastructure, buying chips, and expanding data centers. So a slowdown in this kind of spending would definitely raise eyebrows across the tech supply chain.
Especially for companies like Nvidia, Intel, and AMD, who live and breathe on big AI orders. In fact, analysts at JP Morgan believe data center investments could add between 10 and 20 basis points to U.S. economic growth in 2025 and 2026.
For now, Microsoft seems to be firing on all cylinders. Azure is booming, AI is pulling its weight, and despite global economic jitters, Microsoft is still finding ways to outpace expectations.
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