Microsoft shares surged by 5% in extended trading after the company posted its fiscal third-quarter results that surpassed Wall Street’s expectations. Earnings per share were reported at $2.94, higher than the expected $2.82, and revenue of $61.86 billion also exceeded forecasts of $60.80 billion. Total revenue grew by 17% compared to the previous year, with net income of $21.94 billion. Microsoft’s finance chief, Amy Hood, predicted $64 billion in revenue for the fourth quarter, which is slightly lower than the LSEG consensus but implies a healthy operating margin of 42.3%.
Microsoft’s Intelligent Cloud segment, which includes Azure, Windows Server, Nuance, and GitHub, generated $26.71 billion in revenue, reflecting growth of about 21%. Revenue from Azure and other cloud services increased by 31%, with 7 percentage points attributed to AI, demonstrating the growing demand for artificial intelligence capabilities. The company’s GitHub Copilot code-generation tool has gained 1.8 million paid subscribers, and large customers like Amgen have signed up for significant seat allocations.
The Productivity and Business Processes unit, which includes Office, LinkedIn, and Dynamics CRM software, saw revenue of $19.57 billion, up around 12%. This marks the first full quarter of sales of the Copilot add-on for commercial Microsoft 365 subscriptions. In the More Personal Computing segment, revenue reached $15.58 billion, driven by strong performance in Windows licenses, Surface PCs, video games, and search. Xbox content and services revenue surged by 62%, fueled by the acquisition of Activision Blizzard.
Microsoft’s efforts to address the increasing demand for AI services have led to capacity constraints, impacting the growth of Azure AI services. The company is ramping up capital expenditures to secure Nvidia GPUs to support its AI initiatives. During the quarter, Microsoft introduced new Surface PCs with integrated access to the Copilot chatbot and expanded access to Copilot for small businesses with Microsoft 365 subscriptions. The hiring of Mustafa Suleyman, co-founder of DeepMind, to lead a new Microsoft AI group underscores the company’s commitment to accelerate its AI capabilities.
Excluding the after-hours surge, Microsoft’s stock has risen by 6% this year, in line with the S&P 500 index. The company’s continued focus on innovation, particularly in AI and cloud services, has positioned it well to meet the evolving needs of businesses and consumers. As demand for AI and cloud solutions continues to grow, Microsoft’s strong financial performance and strategic investments are driving its success in the market.
