Microsoft Q3 Earnings & Revenues Beat on Surging Cloud Business

Core Insights - Microsoft reported third-quarter fiscal 2025 earnings of $3.46 per share, beating the Zacks Consensus Estimate by 8.13% and increasing 17.7% year-over-year [1] - Revenues reached $70.06 billion, a 13.3% year-over-year increase, surpassing the Zacks Consensus Estimate by 2.46% [2] - The stock saw a 7% increase in extended trading, driven by strong growth in the Azure cloud infrastructure unit [2] Financial Performance - Commercial bookings increased by 18%, significantly exceeding expectations, driven by Azure commitments from OpenAI [3] - Commercial remaining performance obligation rose 33% to $315 billion, with approximately 40% expected to be recognized in revenues in the next 12 months [3] - Microsoft Cloud revenues were $42.4 billion, growing 21% year-over-year, with a gross margin percentage of 69% [4] Segment Performance - The Productivity & Business Processes segment contributed 42.7% to total revenues, with a 10.4% year-over-year increase to $29.9 billion [5] - M365 commercial cloud revenues increased by 12%, driven by E5 and M365 Copilot, with paid M365 commercial seats growing 7% to 430 million [6] - The Intelligent Cloud segment reported revenues of $26.75 billion, growing 20.8% year-over-year, primarily due to Azure [10] AI and Data Products Growth - Microsoft processed over 100 trillion tokens this quarter, a fivefold increase year-over-year, with Azure AI Foundry adopted by over 70,000 enterprises [20] - GitHub Copilot surpassed 15 million users, representing more than fourfold growth year-over-year [21] - Microsoft Fabric expanded to over 21,000 paid customers, an 80% increase year-over-year [24] Balance Sheet and Cash Flow - As of March 31, 2025, Microsoft had total cash and short-term investments of $79.61 billion, up from $71.55 billion at the end of 2024 [31] - Cash flow from operations was $37 billion, a 16% increase, with free cash flow at $20.3 billion [31] Guidance - For the fiscal fourth quarter, Microsoft expects revenue growth in the productivity and business processes segment between $32.05 billion and $32.35 billion [33] - In Azure, revenue growth is anticipated between 34% and 35% at constant currency [35]