Microsoft has presented strong quarterly figures. This led to a share price increase of more than 7% in trading after the close of the stock market. This increase was due to strong growth in cloud activities and a positive outlook for the coming quarter.
In the third quarter, the company posted earnings of $3.46 per share (excluding certain costs), which was well above the expected $3.22. Revenue rose 13% to $70.07 billion, while analysts had expected $68.42 billion. Net profit amounted to $25.8 billion, a slight increase from $21.9 billion a year earlier.
For the current quarter, Microsoft expects revenue of between $73.15 billion and $74.25 billion, which is higher than the market expectation of $72.26 billion. Azure cloud operations are expected to grow by 34% to 35% in constant currency, faster than the previously expected 31.5%.
Chief Financial Officer Amy Hood indicated that investments will continue to rise in the new fiscal year, but at a slower pace than in fiscal year 2025. She expects an operating margin of 43.35% in 2026, slightly lower than market expectations.
Heavy investment in AI infrastructure
The favorable outlook reassures investors, especially in view of the possible effects of US import tariffs, which could affect investments in AI data centers. CEO Satya Nadella (photo) previously indicated that Microsoft plans to invest approximately $80 billion in AI infrastructure, much of which will come from abroad.
Last quarter, the company invested $16.75 billion in capital projects, mainly in new data centers. This is 53% more than a year earlier and also higher than the expected $16.37 billion.
Revenue from Azure rose by 33%, with about half of that growth coming from increasing demand for AI services. Three months ago, Microsoft indicated that it was struggling with the implementation of some Azure projects outside of AI, but according to Hood, improvements are now visible. The company was also able to add additional infrastructure faster than expected.
Github Copilot has over 15 million users
The Intelligent Cloud division, which includes Azure, generated $26.75 billion, up 21% from last year. This is partly due to the increased popularity of the AI-powered programming assistant GitHub Copilot, which now has more than 15 million users, up from over 3 million a year earlier.
The Productivity and Business division, which includes Office and LinkedIn, saw revenue rise 10% to $29.94 billion. LinkedIn did suffer from a weak labor market, which affected demand for its recruitment services.
Interest in Windows is growing
The More Personal Computing division, which includes Windows, search advertising, and hardware, grew by 6% to $13.37 billion. Sales of devices and Windows licenses rose by 3%, despite high inventories. Microsoft will discontinue support for Windows 10 at the end of October, prompting companies to accelerate their transition to Windows 11. The number of installations rose by 75% in the quarter. Nadella indicated that commercial interest in Windows is growing as the end of support for Windows 10 approaches.
Microsoft also reaffirmed its partnership with OpenAI. The company has the first right to provide additional computing capacity when OpenAI needs it. If Microsoft is unable to do so, OpenAI may engage other cloud providers.
Despite the rise in share price after trading, Microsoft shares are still down just over 6% so far this year.