Core Insights - Microsoft reported $81.27 billion in revenue for the quarter ended December 2025, marking a year-over-year increase of 16.7% and exceeding the Zacks Consensus Estimate by 1.3% [1] - The earnings per share (EPS) for the same period was $4.14, up from $3.23 a year ago, representing a surprise of 6.84% over the consensus estimate of $3.88 [1] Revenue Performance - Revenue from Productivity and Business Processes was $34.12 billion, exceeding the average estimate of $33.49 billion, with a year-over-year change of +15.9% [4] - Intelligent Cloud revenue reached $32.91 billion, surpassing the average estimate of $32.41 billion, reflecting a year-over-year increase of +28.8% [4] - More Personal Computing revenue was $14.25 billion, slightly below the average estimate of $14.27 billion, showing a year-over-year decline of -2.7% [4] - Service and other revenue totaled $64.82 billion, exceeding the average estimate of $62.24 billion, with a year-over-year increase of +21.4% [4] - Product revenue was reported at $16.45 billion, below the average estimate of $17.86 billion, with a year-over-year change of +1.4% [4] Year-over-Year Changes - The year-over-year percentage change for More Personal Computing was -3%, compared to the analyst average estimate of -2.6% [4] - Intelligent Cloud showed a year-over-year increase of 29%, exceeding the analyst average estimate of 26.9% [4] - Productivity and Business Processes had a year-over-year increase of 16%, compared to the analyst average estimate of 13.8% [4] - Overall revenue growth was 17%, surpassing the analyst average estimate of 15.1% [4] - Microsoft 365 Commercial cloud revenue grew by 17%, compared to the average estimate of 15% [4] - Azure and other cloud services revenue increased by 39%, slightly above the analyst average estimate of 38.4% [4] - Windows OEM and Devices revenue had a year-over-year change of 1%, compared to the analyst average estimate of -5% [4] Stock Performance - Microsoft shares returned -1.4% over the past month, while the Zacks S&P 500 composite increased by +0.8% [3] - The stock currently holds a Zacks Rank 2 (Buy), indicating potential for outperformance in the near term [3]

Core Insights - Wall Street is generally optimistic about AI developments despite increased spending by hyperscalers [1][5] - Major tech companies like Microsoft, Google, and Amazon reported strong cloud business performance [1][4] Company Performance - Amazon's AWS segment growth reaccelerated to 20.2%, the highest since 2022 [3] - Microsoft's cloud revenue increased by 26% to $49.1 billion, while Google's cloud revenue rose 34% year over year to $15.1 billion [4] - Analysts noted robust growth in cloud services, particularly those offering AI infrastructure [5] Financial Concerns - Companies utilizing cloud services, such as OpenAI, are struggling to generate profits despite significant spending [2][6] - OpenAI is projected to spend $1.4 trillion while currently generating only $13 billion in revenue, raising questions about its financial sustainability [7]

Core Viewpoint - Microsoft's Q3 FY2025 earnings report showed accelerated revenue growth and continued profit margin expansion, contrary to market expectations of a slowdown [1][9][10] Azure Business Performance - Azure revenue grew by 33% year-over-year, with a constant currency growth rate of 35%, exceeding market expectations of flat growth [1][18] - AI demand contributed 16 percentage points to Azure's growth, marking the largest quarterly increase since Q2 FY2024 [2][21] - Traditional non-AI business demand was stronger than anticipated, with a growth rate of 17%, surpassing the expected 14.7% [2][21] Microsoft 365 Performance - Microsoft 365 Commercial Cloud revenue increased by 12%, with a constant currency growth of 15%, primarily affected by currency headwinds [3][23] - Subscription seat count for commercial M365 grew by 7%, driven by small and medium enterprises [3][26] - Copilot's contribution to revenue growth was less significant than expected, indicating it has not yet become a major revenue driver [3][28] Capital Expenditure (Capex) - Actual Capex for the quarter was $21.4 billion, slightly down from the previous quarter, reflecting a more cautious investment approach [4][41] - Management indicated that Capex would increase in Q4, maintaining guidance for continued growth in FY2026, albeit at a slower rate [4][41] Leading and Lagging Indicators - New enterprise contract signings grew by only 18%, a significant drop from the previous quarter's 67% growth, suggesting potential caution in IT spending [5][43] - The backlog of unfulfilled contracts grew by 34% year-over-year, but the portion expected to be recognized within 12 months only grew by 17% [5][43] Profitability and Cost Management - Gross margin for the quarter was 68.7%, slightly down from the previous year but better than expected [6][46] - Total expenses grew by only 2.4%, indicating effective cost control that helped maintain profit margins despite high Capex [6][47] - Operating profit increased by 16% year-over-year, outpacing revenue growth [6][48] Future Guidance - Guidance for Q4 indicates revenue growth of 13.9% and operating profit growth of 14.4%, suggesting continued positive momentum [7][46] - Azure's growth is expected to remain between 34% and 35%, while commercial M365 growth is projected at 14%, indicating potential challenges for Copilot [7][46]