Microsoft Azure Growth Hits 33%, Tops Estimates

News Desk - 01/05/2025

Microsoft Azure posted strong growth in the third quarter ending March 31, 2025. Revenue from the cloud platform rose 33%, exceeding analyst estimates of 29.7%, according to Visible Alpha. Microsoft shares jumped 7% in after-hours trading, reflecting renewed investor confidence.

As reported by Reuters.com, overall revenue reached $70.1 billion, up 13% from the same quarter last year. Profit stood at $3.46 per share, beating expectations of $3.22. The Intelligent Cloud division, which includes Azure, contributed $26.8 billion.

AI played a major role. It added 16 percentage points to Azure’s growth—up from 13 points in the previous quarter. Commercial bookings increased 18%, driven in part by a new Azure deal with OpenAI. Microsoft declined to comment on the contract size but confirmed it supported momentum.

CEO Satya Nadella addressed recent scrutiny of Microsoft’s data center strategy. On a conference call, he said the company has always adapted its infrastructure plans based on demand. He noted that close attention to such adjustments by analysts is relatively new.

“We have a long history of adjusting our data center plans,” Nadella said. “Only recently have those shifts been under a microscope.”

The company forecasted Q4 cloud revenue growth of 34% to 35% in constant currency, or between $28.75 billion and $29.05 billion—above consensus estimates.

CFO Amy Hood explained that most of the outperformance came from non-AI services. While AI demand was strong, the real upside was Microsoft’s ability to deliver infrastructure to customers earlier than planned.

Capital expenditures increased 53% to $21.4 billion. Yet, investment in longer-lived assets fell to about half. Microsoft is focusing more on short-term assets like GPUs and CPUs, which allow faster deployment and revenue recognition.

Jonathan Neilson, Vice President of Investor Relations, said this shift reflects Microsoft’s priority on flexibility and speed. He noted that once chips are installed, the company can begin recognizing revenue.

For fiscal 2026, which begins in July, Microsoft expects continued infrastructure investment—though at a slower pace and with more focus on short-term assets.

Microsoft Azure continues to play a central role in the company’s cloud and AI growth strategy.