Microsoft (MSFT, Financial) experienced a notable uptick, climbing 3% following a remarkable Q3 (Mar) earnings release. The company outperformed expectations for the fifth consecutive quarter, showcasing substantial EPS growth alongside a revenue increase. The inclusion of Activision Blizzard for the first time this quarter contributed to these results. While Q4 (Jun) revenue projections were mostly as expected, some found them slightly conservative.
Azure emerged as the highlight, registering a 31% growth in constant currency (CC), surpassing the anticipated 28% CC. This marks a significant rebound, with Azure's growth previously hovering in the high-20s. The forecast for Q4 (Jun) remains optimistic, predicting a 30-31% CC growth. Azure's success is partly due to a surge in large-scale deals, including several over $1 billion, and a notable increase in $100+ million and $10+ million deals, fueled by the adoption of AI technologies. Microsoft's diverse AI accelerators, including products from NVIDIA, AMD, and its own creations, play a crucial role in this growth.
Microsoft also reported robust performance across its other segments. The PBP and Intelligent Cloud segments exceeded the higher end of revenue expectations, while the MPC segment met these expectations. The company saw a 31% CC increase in commercial bookings, driven by Azure commitments, and noted a slight improvement in PC market demand. The gaming sector, particularly Activision titles, performed better than anticipated, though Surface demand fell short of expectations.
Looking ahead, Microsoft anticipates a significant sequential increase in capital expenditure (cap-ex) for Q4 (Jun), with FY25 expected to outpace FY24. This increase supports cloud and AI infrastructure expansion. Despite these investments, the company projects only a slight decrease in operating margins for FY25.
Microsoft's recent quarter highlights the continued success and growth of Azure, positioning it as a key player in the cloud and AI markets. This performance could signal positive trends for Amazon's (AMZN, Financial) AWS, which is due to report soon. Despite recent market fluctuations and concerns over increased cap-ex spending, Microsoft's stock has seen significant growth, rising 30% since early October.
