Here's our initial take on Microsoft's (NASDAQ: MSFT) fiscal 2025 third-quarter financial report.
Key Metrics
| Metric |
Q3 2024 |
Q3 2025 |
Change |
vs. Expectations |
| Revenue |
$61.9 billion |
$70.1 billion |
+13% |
Beat |
| Earnings per share |
$2.94 |
$3.46 |
+18% |
Beat |
| Intelligent Cloud revenue |
$22.1 billion |
$26.8 billion |
+21% |
n/a |
| Net cash from operations |
$31.9 billion |
$37.04 billion |
+16% |
n/a |
Strong Growth All Around
Microsoft beat analyst expectations across the board in the third quarter of fiscal 2025, with total revenue surging 13% and earnings per share jumping 18%. Azure and related cloud services revenue soared by 33% year over year, a strong signal that demand for cloud computing and AI is holding up despite macroeconomic uncertainty.
"Cloud and AI are the essential inputs for every business to expand output, reduce costs, and accelerate growth. From AI infra and platforms to apps, we are innovating across the stack to deliver for our customers," said Microsoft CEO Satya Nadella.
Microsoft 365 Commercial products generated revenue growth of 11%, while the consumer side of that business produced 10% revenue growth. Windows OEM and Devices revenue was up 3%, and Xbox revenue rose 8%. Windows 10 end-of-life support ends in October, so Microsoft is benefiting from a refresh cycle as businesses upgrade to new devices running Windows 11.
During the third quarter, Microsoft spent $9.7 billion on dividends and share buybacks combined.
Immediate Market Reaction
The share price of Microsoft was up about 6% in early after-hours trading soon after the third-quarter report was released. The company beat analyst expectations for both revenue and earnings, and there was no indication of a slowdown in demand due to macroeconomic factors in the earnings release. If this rally holds, Microsoft stock will claw back some of the losses it suffered earlier this year.
What to Watch
Microsoft didn't provide any guidance in its earnings report. Instead, the company saved its outlook for the earnings conference call on Wednesday evening. Microsoft's third-quarter results, particularly for the cloud computing business, were solid. However, the quarter ended before macroeconomic uncertainty related to tariffs ramped up in April.
Microsoft's business is diversified, but it's exposed to an economic slowdown on multiple fronts. Businesses could pull back on cloud computing spending, consumers and businesses could delay PC upgrades, and a weak job market could hurt LinkedIn revenue, to name a few potential impacts. Investors should consult Microsoft's earnings call to get the full details of the company's outlook for the fiscal fourth quarter.
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Timothy Green has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
