Microsoft (MSFT) shares rose on Friday after it reported its fiscal third quarter earnings, beating analysts' estimates on the top and bottom lines on the strength of its cloud computing business.

“Microsoft Copilot and Copilot stack are orchestrating a new era of AI transformation, driving better business outcomes across every role and industry," Microsoft CEO Satya Nadella said in a statement.

Microsoft said on Thursday that its AI services contributed 7 percentage points of growth to its Azure and other cloud services revenue. That's up from 6 percentage points in Q2, and 3 points in Q1. Microsoft first broke out its AI percentage contributions to Azure in Q4 last year, saying it added 1 percentage point to Azure revenue at the time.

The company also said it anticipates Q4 revenue of between $63.5 billion and $64.5 billion, just a head of analysts' expectations of $64.7 billion.

Microsoft CFO Amy Hood said during the company's earnings call that the tech giant is seeing near term AI demand outstrip available capacity.

Shares of Microsoft were up about 2% on Friday.

Microsoft reported earnings per share (EPS) of $2.94 on revenue of $61.9 billion. Wall Street was anticipating EPS of $2.83 on revenue of $60.88 billion, according to analysts’ estimates compiled by Bloomberg.

Microsoft's overall commercial cloud revenue came in at $35.1 billion, ahead of Wall Street estimates of $33.93 billion. On a segment bases, Microsoft saw Productivity and Business Processes revenue of $19.57 billion, beating expectations of $19.54 billion. Intelligent Cloud and More Personal Computing revenue came in at $26.71 billion and $15.58 billion, respectively. That was better than the $26.25 billion and $15.07 billion analysts expected, respectively.

The revenue beat in More Personal Computing was driven by 11% growth in Windows OEM sales to PC manufacturers and 62% growth in Xbox content and services sales, with 61% attributable to the net impact of Microsoft's acquisition of Activision Blizzard.

Shares of Microsoft are up more than 10% year to date, behind rivals such as Google parent Alphabet (GOOG, GOOGL) and Amazon (AMZN), which are up 15% and 22%, respectively. Over the last 12 months, Microsoft’s shares have climbed 32%, though Amazon has jumped 67%, while Google is up 47%.

The three companies are battling it out to see which can offer the most comprehensive AI solutions to enterprise customers and customers, whether that means making heavy investments in third-party firms like OpenAI and Anthropic or reorganizing their internal teams like Google.