- Microsoft reported Q3 earnings and revenue that exceeded Wall Street expectations.
- The company’s adjusted earnings per share were $4.13 versus an estimate of $3.67.
- Revenue reached $77.7 billion, beating estimates of $75.4 billion.
- Microsoft anticipates Q4 revenue between $79.5 billion and $80.6 billion.
- Significant AI-related spending on infrastructure is raising concerns among investors despite the strong results.
Microsoft posted third-quarter earnings and revenue results above Wall Street forecasts but saw its stock drop up to 5% on the following trading day. For the September quarter, the company reported adjusted earnings per share (EPS) of $4.13, surpassing the consensus estimate of $3.67, according to FactSet. Revenue totaled $77.7 billion, ahead of the expected $75.4 billion.
Chief Financial Officer Amy Hood highlighted the growth in the Microsoft Cloud, describing it as driven by increasing customer demand for Microsoft’s unique platform. Hood set revenue guidance for the next quarter between $79.5 billion and $80.6 billion. Despite these strong financials, investor concerns appear to focus on the costs linked to Microsoft’s investments in Artificial Intelligence (AI).
Hood indicated that Azure, Microsoft’s cloud computing service, would grow at a 37% rate in constant currency, matching analysts’ expectations. She also noted that demand for Azure currently far exceeds its capacity to supply services. CEO Satya Nadella mentioned that Microsoft plans to increase its total AI capacity by over 80% this year and double its data center size over the next two years. This expansion requires heavy capital spending, which reached $34.9 billion for the quarter, surpassing predictions. Hood added that capital expenditure growth in fiscal 2026 will outpace that of 2025.
While trailing competitors like Alphabet (GOOGL) and Meta Platforms in AI-powered consumer tools, Microsoft is heavily investing in enhancing its operating system. The introduction of voice activation for Copilot on Windows—a new AI assistant feature triggered by saying “Hey Copilot”—has generated positive investor reactions, lifting shares recently. However, Wall Street remains cautious about the financial impact of Microsoft’s rapid AI spending.
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