Microsoft’s stock soared over 7 per cen in after-hours trading on Wednesday, adding more than USD 200 billion to its market value, after the tech giant announced better-than-expected growth projections for its Azure cloud computing business. The news comes as a welcome relief to investors concerned about global economic uncertainty and a possible slowdown in AI-driven demand.
Azure posts 33 per cent growth, AI drives momentum
Microsoft reported that Azure revenue rose 33 per cent year-over-year in the quarter ending March 31, beating analyst estimates of 29.7 per cent, according to Visible Alpha. AI contributed 16 percentage points to this growth, up from 13 points in the previous quarter.
Looking ahead, Microsoft forecasts 34–35 per cent cloud revenue growth for the next quarter, translating to USD 28.75 billion to USD 29.05 billion, well above Wall Street predictions.
AI is still key, but non-AI business leads the outperformance
Microsoft’s Chief Financial Officer Amy Hood clarified that while AI continues to contribute significantly to cloud growth, the main driver for the quarter’s performance came from non-AI business segments.
The tech giant also reported an 18 per cent rise in commercial bookings, thanks in part to a new Azure contract with ChatGPT-maker OpenAI, though specific deal figures weren’t disclosed.
Spending shifts to shorter-lived AI infrastructure
Capital expenditures rose 53 per cent to USD 21.4 billion in Q3, but Microsoft indicated a shift in focus toward shorter-lived assets like chips over longer-term infrastructure like data center buildings.
In FY2026 (starting July), Microsoft plans to continue investing heavily in AI, but with a slower growth rate and a sharper focus on CPU and GPU integration, allowing for quicker revenue recognition.
Satya Nadella responds to market concerns
CEO Satya Nadella addressed investor worries about cancelled data centre leases, stating Microsoft has always adjusted its data centre plans based on demand. Analysts had recently flagged such changes as possible signs of overcapacity, but the strong Q3 showing suggests otherwise.
Microsoft’s results set a positive tone for the tech sector
Microsoft joins Google and Meta in defying fears of an AI slowdown, offering a much-needed boost to confidence in Big Tech. Analysts say this could benefit not just Microsoft but also AI chipmakers like Nvidia, AMD, and Intel, all of whom rely on continued investment in cloud and AI infrastructure.
Inputs from Reuters
