Microsoft surges 9% after blazing past earnings expectations with robust cloud growth
Shreeaa Rathi | TIMESOFINDIA.COM | May 01, 2025, 21:28 IST
( Image credit : AP )
Microsoft's stock soared following a robust earnings announcement that outperformed Wall Street's predictions. The surge was largely fueled by advancements in cloud computing and artificial intelligence, with Azure, its cloud service, experiencing remarkable growth. The AI sector played a pivotal role in bolstering Azure's performance. The tech giant also reaffirmed its commitment to capital expenditures, forecasting better operating margins ahead.
Microsoft stock soared 9% on Thursday following a blockbuster third-quarter earnings report that exceeded Wall Street expectations and highlighted the tech giant’s continuing momentum in cloud computing and artificial intelligence.
For the quarter ended March 31, Microsoft reported adjusted earnings of $3.46 per share on revenue of $70.1 billion. Analysts surveyed by FactSet had forecasted earnings of $3.22 per share on revenue of $68.4 billion. The results also mark a sharp year-over-year improvement—earnings were up from $2.94 per share, and revenue rose from $61.9 billion in the same period last year.
A key driver of the surge was Microsoft's booming cloud business. Total cloud revenue climbed 20% year over year to $42.4 billion. Azure, Microsoft's public cloud platform, stood out with a 33% growth rate—up from 31% last quarter. Importantly, artificial intelligence played a growing role in this performance, contributing 16 percentage points to Azure’s growth, up from 13 points in the previous quarter.
Investor confidence only strengthened after Microsoft’s earnings call Wednesday evening, pushing shares to close at $430.94 on Thursday—an increase of nearly 10%.
Capital expenditures for the quarter reached $16.7 billion, slightly above analyst projections of $16.2 billion and well above the $11 billion recorded a year ago. Despite recent reports suggesting potential cutbacks in data-center spending, Microsoft reaffirmed its full-year capital expenditure outlook.
Looking ahead, Microsoft Chief Financial Officer Amy Hood confirmed that the company expects operating margins to improve slightly for the full year, even with increased investments in AI. She also signaled further momentum in the final quarter of the fiscal year, projecting Azure revenue growth of around 34%.
Ben Reitzes, an analyst at Melius Research, reaffirmed his Buy rating on Microsoft stock with a target price of $445. “Confidence in Azure has been restored, and Microsoft is underrated in its potential to build AI agents and interfaces for customers,” he wrote in a note to clients.
The optimism around Microsoft's performance follows similarly positive guidance from other enterprise software leaders, including SAP and ServiceNow. ServiceNow shares were also up after their own earnings beat last week, reflecting resilient software spending across the industry.
“The services we offer across cloud and AI are helping customers grow, operate more efficiently, and boost productivity,” said Kendra Goodenough, Microsoft’s senior director of investor relations. “That’s exactly what businesses are looking for right now.”
Not everyone was upbeat ahead of the report. Jackson Ader, an analyst at KeyBanc Capital Markets, had downgraded Microsoft stock just two weeks prior. Reflecting on the timing, he wrote, “Our downgrade looks pretty foolish right now. No need to hide from it.”
Despite the candid admission, Ader maintained a neutral Sector Weight rating, citing concerns about the long-term return on investment for AI initiatives and potential cost pressures. “We still believe there are better places to play offense in a software stock recovery,” he wrote, though he conceded that Microsoft's performance this quarter was hard to ignore.
With its strong financials, aggressive AI integration, and continued cloud dominance, Microsoft is proving it remains a powerhouse in the evolving tech landscape—and the market is taking notice.
Would you like a summary or visual breakdown of Microsoft’s financials this quarter?
For the quarter ended March 31, Microsoft reported adjusted earnings of $3.46 per share on revenue of $70.1 billion. Analysts surveyed by FactSet had forecasted earnings of $3.22 per share on revenue of $68.4 billion. The results also mark a sharp year-over-year improvement—earnings were up from $2.94 per share, and revenue rose from $61.9 billion in the same period last year.
A key driver of the surge was Microsoft's booming cloud business. Total cloud revenue climbed 20% year over year to $42.4 billion. Azure, Microsoft's public cloud platform, stood out with a 33% growth rate—up from 31% last quarter. Importantly, artificial intelligence played a growing role in this performance, contributing 16 percentage points to Azure’s growth, up from 13 points in the previous quarter.
Investor confidence only strengthened after Microsoft’s earnings call Wednesday evening, pushing shares to close at $430.94 on Thursday—an increase of nearly 10%.
Capital expenditures for the quarter reached $16.7 billion, slightly above analyst projections of $16.2 billion and well above the $11 billion recorded a year ago. Despite recent reports suggesting potential cutbacks in data-center spending, Microsoft reaffirmed its full-year capital expenditure outlook.
Looking ahead, Microsoft Chief Financial Officer Amy Hood confirmed that the company expects operating margins to improve slightly for the full year, even with increased investments in AI. She also signaled further momentum in the final quarter of the fiscal year, projecting Azure revenue growth of around 34%.
Ben Reitzes, an analyst at Melius Research, reaffirmed his Buy rating on Microsoft stock with a target price of $445. “Confidence in Azure has been restored, and Microsoft is underrated in its potential to build AI agents and interfaces for customers,” he wrote in a note to clients.
The optimism around Microsoft's performance follows similarly positive guidance from other enterprise software leaders, including SAP and ServiceNow. ServiceNow shares were also up after their own earnings beat last week, reflecting resilient software spending across the industry.
“The services we offer across cloud and AI are helping customers grow, operate more efficiently, and boost productivity,” said Kendra Goodenough, Microsoft’s senior director of investor relations. “That’s exactly what businesses are looking for right now.”
Not everyone was upbeat ahead of the report. Jackson Ader, an analyst at KeyBanc Capital Markets, had downgraded Microsoft stock just two weeks prior. Reflecting on the timing, he wrote, “Our downgrade looks pretty foolish right now. No need to hide from it.”
Despite the candid admission, Ader maintained a neutral Sector Weight rating, citing concerns about the long-term return on investment for AI initiatives and potential cost pressures. “We still believe there are better places to play offense in a software stock recovery,” he wrote, though he conceded that Microsoft's performance this quarter was hard to ignore.
With its strong financials, aggressive AI integration, and continued cloud dominance, Microsoft is proving it remains a powerhouse in the evolving tech landscape—and the market is taking notice.
Would you like a summary or visual breakdown of Microsoft’s financials this quarter?