Microsoft Q3 Soars as AI and Azure Growth Fuels Market Gains

ITAM News & Analysis

Microsoft Q3 Soars as AI and Azure Growth Fuels Market Gains

On the 30^th April, Microsoft released its Q3 quarterly earnings report, exceeding expectations and igniting investor optimism. Investors had been keeping a watchful eye on Azure’s Cloud performance after Microsoft’s Q2 Cloud results fell short of expectations. However, somewhat surprisingly, the results demonstrated an impressive quarter powered by remarkable growth in Azure and AI-driven cloud innovations. This resurgence has sent shares soaring, reinforcing Microsoft’s position as a leader in the evolving digital landscape.

Microsoft reported revenue of $70.1 billion, a 13% increase on the previous year, beating the analyst predictions of $68.42bn. Given the huge investments made by Microsoft in Cloud and AI, analysts will be pleased to see that revenue in Intelligent cloud was $26.8 billion, an increase in 21% year on year. Specifically, Azure and other cloud services revenue increased by 33%, meaning that Azure revenue played a huge part in the quarter’s success. Reinforcing Microsoft’s successful quarter, during the earnings call, Satya Nadella stated, “It was a record quarter, driven by continued strength of Microsoft Cloud, which surpassed $42 billion in revenue, up 22% in constant currency”.

Highlights

The call mentioned several highlights, including the following:

• Microsoft is continuing to expand its datacenter capacity, opening datacenters in ten countries in Q3 alone.
• Accelerating demand for cloud migrations seen with customers across all industries, from ServiceNow to Coca-Cola.
• For mission critical VMware, SAP, and Oracle workloads, Microsoft remains the cloud of choice.
• Increased AI performance by almost 30% ISO power across Microsoft’s blended fleet.
• Microsoft Fabric now has more than 21,000 paid customers (up 80% year-over-year), with 40% of customers using “real time intelligence” just five months after general availability.
• Hundreds of thousands of customers across geographies and industries now use Copilot, up 3x year-over-year.
• More than 230,000 organisations – including 90% of the Fortune 500 – have already used Copilot Studio

FY25 Q3 Financial Summary

• Productivity and business processes saw growth of 10% (13% in constant currency) to a total of $29.9 billion. This was largely driven by Microsoft 365 commercial cloud revenue, which was up 12%, and an increase in Dynamics 365 revenue growth of 16%.
• Intelligent Cloud revenue increased by 21% to a total of $26.8 billion, thanks in part to a 33% increase in Azure and Cloud services. However, Microsoft Cloud gross margin percentage decreased as a result of Microsoft scaling its AI infrastructure.
• Personal Computing revenue was up 6% to a total of 13.4 billion, partly driven by the Xbox content and services revenue increase of 8%, and search & news advertising revenue increase of 21%.

What does this mean for ITAM?

With Azure revenue surging 33% year-over-year, ITAM professionals must focus on refining cloud cost management strategies, ensuring optimised licensing and resource allocation. This highlights the ever-increasing need for collaboration and integration with FinOps teams.

In addition to cloud, these Microsoft results demonstrate that the shift to AI-powered solutions is happening right now. This holds huge potential to streamline processes within ITAM. However, it’s vital we ensure guardrails are in place and that businesses are prepared for managing AI within their organisation.

Also, the increased revenue growth for Microsoft also demonstrates higher levels of customer spending. This could result in increased enterprise spending on ITAM tools, especially when combined with strong investor confidence.

In addition, the huge increase in both cloud and AI adoption may represent additional challenges in the world of sustainability and GreenOps. ITAM teams must align with sustainability goals to ensure energy-efficient cloud usage and the responsible incorporation of AI.

Conclusion

Investors and analysts will, most likely, welcome these results. They’ve most likely been concerned with the performance of the previous quarter, and are on high alert after the introduction of US tariffs (although, the potential impact of tariffs is unlikely to be evident until next quarter). The results are largely positive. For ITAM, they represent the speed at which the industry is changing. This further highlights the need for us to remain ahead of the curve, both in the cloud and AI space.

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