Microsoft surges on strong cloud growth and upbeat forecast, easing investor concerns

The star of the show was Microsoft's Azure cloud-computing business, which had revenue rise 35% year over year—well above the 31% analysts had forecast. That robust performance helped to counteract investor concerns about diminishing cloud momentum and extravagant spending on artificial intelligence that had dragged Microsoft shares down over the past few months.

Chief Executive Satya Nadella cited ongoing demand for AI and cloud services as major drivers. "Software is the most valuable resource we have to combat any kind of inflationary pressure or growth pressure," he said on the earnings call.

June forecast supports investor confidence

Microsoft forecast total revenue of $73.7 billion for the fourth quarter that ends in June—2% more than analysts predicted. The upbeat forecast was enough to end a string of recent quarters during which Microsoft's stock had dropped after earnings releases.

The optimistic outlook also allowed the company to close its performance gap with other megacap tech rivals. Microsoft's stock has lagged all other top tech giants, except Alphabet, over the last year, having been slowed by two federal antitrust lawsuits. Tariff uncertainty hangs over but impact remains in check

Although concerns over tariffs have recently held markets in thrall, Microsoft leaders said demand signals are steady. CFO Amy Hood reported demand across Microsoft's business segments "has remained consistent" in spite of economic uncertainty globally.

The Windows and hardware-based personal computing segment increased 6% to $13.4 billion, outpacing Microsoft's guidance of $12.4 billion to $12.8 billion. The company admitted that "tariff uncertainty" resulted in increased PC inventories that should normalize in the current quarter. While tariffs represent a longer-term danger to PC sales, Microsoft's diversified business mix is regarded as durable.

Capex lower than expected, but growth to continue

Microsoft reported capital spending, including finance leases, of $21.4 billion—some $1 billion shy of estimates. While Meta Platforms lifted its full-year capex target to $72 billion, Microsoft's Hood indicated the company's expenditures would keep increasing in the forthcoming fiscal year, though at a slower rate than the 57% increase predicted for the year that ends this June.

At the same time, each of Microsoft's key business groups exceeded expectations. Its productivity and business processes division, which is home to Microsoft 365, generated $29.9 billion in revenue—a 10% year-over-year increase and beyond the high end of internal targets.

The earnings and guidance show Microsoft's capacity to steer through a turbulent macroeconomic environment characterized by trade tensions and inflationary forces. With robust AI-led demand and sound enterprise outlays, the tech giant is consolidating its position as the sector's most stable pillar.