Microsoft beats expectations with double-digit EPS growth

Overview

Microsoft delivered another robust quarter, with double-digit growth across revenue, operating income, and EPS. Cloud and AI services continued to drive performance, especially within Azure and Microsoft 365.

CEO Satya Nadella noted: “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.”

Q3 FY2025 vs. Q3 FY2024:

• Revenue increased to $70.1bn (+13% YoY), driven by strength in Microsoft Cloud, which grew to a record value of $42.4bn (+20% YoY).
  • Productivity and Business Processes revenue was $29.9bn (+10% YoY), with Microsoft 365 Commercial cloud revenue up +12% YoY, Dynamics 365 revenue up +16% YoY and LinkedIn revenue up +7% YoY.
  • Intelligent Cloud revenue was $26.8bn (+21% YoY), with Azure and other cloud services up +33% YoY and Server products and cloud services revenue up +22% YoY.
  • More Personal Computing revenue was $13.4bn (+6% YoY), influenced by Search and news ad revenue (ex-TAC) up +21% YoY, Xbox content and services up +8% YoY and Windows OEM and Devices revenue up +3% YoY.
• Operating income rose to $32.0bn (+16% YoY), supported by cost discipline and mix shift to higher-margin services.
• Net income grew to $25.8bn (+18% YoY), reflecting strong operating leverage across all segments.
• Diluted EPS also increased to $3.46 (+18% YoY), an outperformance driven by cloud growth, AI adoption, and capital efficiency.
• R&D expenses were $8.2bn (+7% YoY), after Microsoft launched hundreds of new products and services across its cloud, AI, and enterprise stack.
• Microsoft returned $9.7bn to shareholders in Q3 FY2025 via dividends and share repurchases.
• Net cash from operations recorded a value of $37.0bn (+16% YoY).
• Cash and short-term investments stood at $79.6bn (up from $75.5bn in June 2024).

While Microsoft did not issue formal forward guidance in the earnings release, management reiterated strong confidence in sustained cloud and AI-led growth. Azure momentum, AI-powered tools like Copilot, and strategic R&D investments position the company to capture long-term enterprise and productivity demand. Management also emphasized that investments in AI infrastructure and innovation remain central to Microsoft’s future growth engine.

After a rather tumultuous day on the US market, which opened the last trading day of April in decline after the US economy contracted for the first time since 2022, the publication of quarterly results brought somewhat better sentiment among investors on Wall Street, with the stock price of MSFT shares increasing by almost +6% in the after-market session. Also, in the last trading week, the company’s share price managed to break through and even exceed the 50-day moving average for only the second time this year, after an increase of approximately +5.3%. However, since the beginning of this year, the MSFT share price is still on a downward trend, falling by approximately -5.5% after all the global uncertainty that has appeared on the capital markets in recent months.

Author: Ionuț-Adrian Lazar