Microsoft beats Wall Street expectations, reports accelerating Azure growth and $37B AI run rate

Microsoft’s Azure cloud business accelerated in the March quarter, growing 40% and beating the company’s forecast, giving the tech giant a new answer to questions about its ability to translate record spending on AI infrastructure into strong financial results.

The company’s revenue rose 18% to $82.9 billion, beating the analyst consensus of $81.4 billion, and earnings per share jumped 23% to $4.27, above the $4.06 Wall Street expected.

AI launch rate: In its earnings release, Microsoft also revealed that its AI business has reached an annual revenue of $37 billion, up 123% from last year. This is the first time the company has revised this figure since it reported a run rate of $13 billion in January 2025.

Capex Trends: Capital spending fell to $31.9 billion from $37.5 billion in the previous quarter. Microsoft had said the slowdown would come and reflect a period of data center construction and hardware delivery, not a drop in demand for cloud and AI services.

Copy: In the quarter, Microsoft 365 Copilot now exceeds 20 million paid seats, up from 15 million in January. That means about 4.4% of the company’s commercial base is in its paid business AI program.

Total cloud: Microsoft Cloud revenue, which includes Azure, commercial Microsoft 365, LinkedIn, and Dynamics 365, rose 29% to $54.5 billion. The company’s remaining operating obligations, an average of future contract revenue, were $627 billion, with a significant portion of that backlog tied to OpenAI.

Elsewhere in the Microsoft business:

• Revenue in the More Personal Computing segment fell 1% to $13.2 billion, with Xbox and services revenue down 5% and Windows OEM and devices revenue down 2%. Search advertising revenue grew 12%.
• Part of Manufacturing and Business Processes, which includes Microsoft 365, LinkedIn, and Dynamics 365, grew 17% to $35 billion. LinkedIn revenue increased 12%, while Dynamics 365 revenue increased 22%.
• Part of the Intelligent Cloud, home of Azure, grew 30% to $34.7 billion, making it nearly equal in size to the manufacturing segment for the first time.

The results come three months after Microsoft’s stock fell 10%, wiping out a market value of $357 billion, despite the company beating expectations on revenue and earnings.

Investors focused on record spending, Copilot’s product that accounted for just 3.3% of Microsoft 365’s commercial base at the time, and lagging revenue heavily dependent on OpenAI.

OpenAI’s relationship has changed a lot since then.

This week, the two companies restructured their relationship, with OpenAI ending its exclusive commitment to Microsoft’s Azure cloud and gaining the ability to deploy its products on other platforms, notably Amazon Web Services. Microsoft, for its part, locked in its profit-sharing plan and removed a clause that would have eliminated it if OpenAI had declared general artificial intelligence.