Microsoft Q3 Revenue Jumps 17%

Microsoft reported a 17% increase in revenue to $61.9 billion and a 20% rise in net income to $21.9 billion in its fiscal third quarter. The growth was primarily driven by strong demand for its software and cloud services, especially in the field of artificial intelligence (AI). The company's Azure cloud platform, a significant contributor to the AI sector, saw a 31% increase in revenue.

The Intelligent Cloud business, a major driver of Microsoft's revenue growth, surged 21% year over year to $26.7 billion. Within this business, server products and cloud services revenue increased 24%. The overall cloud business, which spans multiple segments, saw its revenue rise 23% to $35.1 billion, representing about 56% of Microsoft's total revenue for the quarter. The gross margin in the cloud business was 72%, consistent with the previous quarter and the same quarter a year ago.

Microsoft CEO Satya Nadella revealed during the post-earnings call that the company had set new records for game streaming hours, console usage, and monthly active devices. The company's shares were up 4.25% in premarket trading on Friday, after closing at $399.04 on the previous day. The stock rose by 2.5% on Friday.

Looking ahead, Microsoft anticipates solid revenue growth for Q4 and issued robust guidance for 2025, expecting double-digit growth in both revenues and operating income. However, the company expects a 1% year-on-year decline in operating margins. Capital expenditures for 2025 are projected to exceed 2024 levels as the company intensifies investments in its cloud and AI infrastructure to secure a larger share of the AI market. The Azure business is expected to grow its revenue by 30% to 31% in the current quarter.