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Microsoft (MSFT) blew past Wall Street’s expectations in its fiscal third quarter, racking up $70.1 billion in revenue, up 13%, and $25.8 billion in net income, up 18%, fueled by relentless demand for cloud and AI.
Earnings came in at $3.46 per share, easily topping consensus estimates of $3.22.
Cloud stays hot
Microsoft’s cloud engine kept roaring in Q3, with Azure and other cloud services surging 33% year-over-year, powering a 21% increase in the all-important Intelligent Cloud segment, which hit $26.8 billion. Server product revenue rose 22% as demand for AI infrastructure stayed hot.
Microsoft 365 and Xbox deliver, LinkedIn grows
The Productivity and Business Processes segment brought in $29.9 billion, up 10% from last year, driven by steady growth in Microsoft 365 and Dynamics. Microsoft 365 Commercial revenue rose 11%, with its cloud-based suite climbing 12%, while consumer revenue grew 10%. Dynamics 365 jumped 16%, lifting Dynamics overall by 11%.
LinkedIn notched a 7% gain, which may look unimpressive to some but feels like a feat in this sluggish job market. (For context, it’s down from 10% revenue growth last year, and 9% revenue growth in Q2 2025.)
Meanwhile, More Personal Computing generated $13.4 billion, a 6% increase. Xbox content and services rose 8%, search and news advertising surged 21%, and Windows OEM and Devices grew 3% — a rare bright spot in the otherwise sleepy PC category.
Microsoft also returned $9.7 billion to shareholders via dividends and buybacks.
Earnings call focused on demand and hyperscaling
On the earnings call, Microsoft executives emphasized the sheer pace of AI-related demand, saying they can’t build data centers fast enough. Hyperscaling — the rapid expansion of cloud infrastructure — has become systemic, driven not just by digital-native startups but by major enterprise customers across industries.
Microsoft cited Abercrombie & Fitch (ANF), Coca-Cola (KO), and BNY Mellon (BK) as examples of large-scale customers leaning heavily into both AI and non-AI workloads. Management noted that digital-native clients increasingly run both workloads in the same cloud, deepening the stickiness of the relationship.
AI vs. Non-AI Growth
Although analysts zeroed in on AI during the call, management was quick to point out that the bulk of revenue growth this quarter came from non-AI workloads.
Still, the AI story remains compelling: Microsoft has effectively turned its capital expenditures — on GPUs, CPUs, storage, and infrastructure — into revenue, creating what one analyst called an “inspiring” Azure performance. Executives described a blurred line between AI and non-AI usage, reflecting how integrated AI has become across Microsoft’s cloud offerings.