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Microsoft posted better than expected quarterly earnings on Wednesday, as its cloud division reported robust sales growth on strong demand from artificial intelligence-related services, calming fears of a slowdown.
Revenue rose 13 per cent in the quarter to the end of March from the same period in the previous year to $70.1bn. Net income increased 18 per cent to $25.8bn. Both figures exceeded the average estimate in an S&P Visible Alpha survey.
Microsoft shares jumped 6 per cent in after-hours trading in New York, adding about $176bn in market value. The shares had fallen by the same margin since the end of 2024 on concerns about the impact of US President Donald Trump’s tariffs on global supply chains and American economic growth.
Revenue from cloud computing services rose 20 per cent from a year ago to $42.4bn, broadly in line with expectations. The unit that houses its Azure cloud platform had missed expectations in the previous quarter, causing the shares to sell off.
“The main focus was on Azure growth” that “significantly beat muted expectations”, said Barclays analyst Raimo Lenschow. “The big improvement in AI contribution shows the high potential for AI once capacity becomes available.”
Microsoft’s capital expenditure — spending on equipment and other major investments — was $21.4bn in the quarter, up from $14bn in the same period a year earlier. The company said in January that it would spend roughly $80bn in the fiscal year ending June 30 to build new data centre infrastructure.
Big Tech peers Google and Meta have similarly stood by or increased their spending plans in the face of investor scepticism and a deteriorating economic outlook. On Wednesday, Meta said it could spend as much as $72bn on capex this year, up from a prior forecast for $65bn, as it seeks to become a leader in AI and as infrastructure hardware gets more expensive.
In an interview with the Financial Times this week, Microsoft president Brad Smith pledged to spend “tens of billions of dollars” a year on European data centres to protect customers’ access to their data and computing power. The move is intended to reassure the region that Trump will not be able to cut off access to the critical technology.
Yet the software giant’s evolving relationship with start-up OpenAI, which it has backed with $13bn in investment, has raised doubts about whether it will adjust its pace of development.
Microsoft in January said it would change the structure of its deal with OpenAI to enable the company led by Sam Altman to use rivals’ cloud computing services. It retains right of first refusal.
The move coincided with the start-up announcing with cloud provider Oracle and Japan’s SoftBank that it would build at least $100bn of AI infrastructure in the US in a project dubbed Stargate.
Microsoft has in recent weeks been forced to push back against claims that it was experiencing slowing AI demand following reports it had cancelled leases and walked away from negotiations with multiple data centre providers.
“We are slowing or pausing some early-stage projects,” Noelle Walsh, president of Microsoft’s cloud operations, said in a statement addressing the issue earlier this month. “While we may strategically pace our plans, we will continue to grow strongly.”
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