Microsoft(US:MSFT) Tianfeng Securities·2025-05-28 15:16Investment Rating - The investment rating for Microsoft is "Buy" with a 6-month outlook maintained [5]. Core Insights - Microsoft reported FY25Q3 revenue of $70.1 billion, a 13% year-over-year increase, surpassing Bloomberg consensus estimates of $68.5 billion. Gross profit reached $48.1 billion, exceeding expectations of $46.7 billion, with earnings per share at $3.46, up 18% year-over-year, also above the consensus of $3.21 [1]. - The guidance for FY2025Q4 revenue is projected between $73.15 billion and $74.25 billion, with expected operating expenses of $18 billion to $18.1 billion. Despite ongoing investments in AI, the operating profit margin is expected to see a slight year-over-year increase for the full fiscal year 2025 [1]. - The productivity and business processes segment generated $29.9 billion in revenue, a 10% increase year-over-year, driven by Microsoft 365 and LinkedIn. M365 commercial cloud revenue grew by 12%, with ARPU uplift driven by Copilot and E5 packages. Consumer subscriptions increased to 87.7 million due to a price hike in January [1]. - The personal computing segment reported revenue of $13.4 billion, a 6% year-over-year increase, exceeding expectations. Windows OEM and device revenue grew by 3%, impacted by high inventory levels. Search and news advertising revenue increased by 21%, benefiting from third-party partnerships and increased usage of Bing and Edge [2]. - The intelligent cloud segment achieved revenue of $26.8 billion, a 21% year-over-year increase, primarily driven by Azure, which saw a 33% revenue growth. AI services contributed approximately 16 percentage points to this growth, indicating strong enterprise demand and faster-than-expected expansion of AI infrastructure [2]. - Over 70,000 enterprises utilized Foundry to design, customize, and manage AI applications and agents, processing over 100 trillion tokens, a fivefold increase year-over-year. Microsoft 365 Copilot user numbers tripled year-over-year, with record customer renewals [3]. - Capital expenditures were guided to remain unchanged at $21.4 billion, slightly below expectations, with approximately half allocated to cloud and AI-related long-term assets [3]. - The report indicates that Microsoft is experiencing high-quality growth momentum driven by AI, with significant acceleration in AI revenue growth and robust performance in Azure. The company is also focused on cost reduction and efficiency improvements, leading to a projected increase in profit margins for FY25 [4].