Heading into the "biggest earnings day ever", MSFT was near the bottom of the Mag7 group, down 22% from its 52-week high, with capacity constraints hampering growth and CapEx concerns weighing down the stock.
Microsoft has guided to roughly $80 billion in AI data center spending this fiscal year, and the Street wants to know if that money is actually getting deployed.
The headline results were solid and prompted initial gains in MSFT after hours as it beat top- and bottom-line:
*MICROSOFT 3Q REV. $82.89B, EST. $81.46B
*MICROSOFT 3Q EPS $4.27, EST $4.07
Breaking down the revenue saw beats across the board:
Microsoft Cloud revenue $54.5 billion, estimate $53.78 billion
Intelligent Cloud revenue $34.68 billion, estimate $34.32 billion
Productivity and Business Processes revenue $35.01 billion, estimate $34.48 billion
More Personal Computing revenue $13.19 billion, estimate $12.65 billion
But Azure and other cloud services revenue barely beat expectations Ex-FX +39%, estimate +38.2%
But those gains were quickly erased as it appears MSFT is not deploying capital as fast as expected:
- *MICROSOFT 3Q CAPEX INCLUDING LEASES $31.9B, EST. $35.29B
The result of all that is MSFT shares are down around 3% after hours, after breaking above recent highs...
Satya Nadella (CEO) was, of course, optimistic: "We are focused on delivering cloud and AI infrastructure and solutions that empower every business to eval-max their outcomes in the agentic computing era. Our AI business surpassed an annual revenue run rate of $37 billion, up 123% year-over-year."