Investing.com - Microsoft shares surged in premarket trading Thursday after the tech giant reported better-than-expected fiscal third-quarter results as its key cloud business continued ride AI-fueled demand.
Microsoft Corporation (NASDAQ:MSFT) jumped nearly 8% in the pre-open trade.
The tech giant reported earnings per share (EPS) of $3.46 on revenue of $70.1 billion. Analysts polled by Investing.com anticipated EPS of $3.23 on revenue of $68.53B.
Azure, Microsoft’s cloud business, grew 33% in Q1 from a year earlier, beating analyst estimates of 30.3%, with AI making up 16% of the overall Azure growth.
Microsoft’s Intelligent Cloud business, which includes the Azure cloud, reported a 21% rise in revenue to $26.75B, beating estimates of about $26.16B.
Signs that AI is increasingly playing an important role in the Azure growth come just as many had feared that Microsoft’s recent plans to scale back investments in data centers pointed to weaker AI demand.
Capital expenditures, excluding finance leases, jumped 52.8% to $16.75 billion, signaling that the tech giant’s heavy AI investments aren’t likely to slow.
Microsoft expects fourth-quarter revenue to grow between 12% and 14% in constant currency, 2% ahead of consensus estimates, citing consistent demand signals for search, gaming, and other commercial businesses. This marks the first time in six quarters that Microsoft has guided above expectations.
"It does not often happen that a Mega-cap company can significantly surprise investors with an earnings report, but that is what happened with MSFT," Barclays analysts commented in a post-earnings note.
"Against low expectations and mixed checks, MSFT delivered a much better quarter highlighted by accelerating Azure growth in Q3 and strong Q4 guidance," they added.
Similarly, Stifel analysts said Microsoft has "returned to form" following a "few rocky quarters."
"With Azure growth back-on-track, expenses clearly under control and management’s well-informed capex plans we expect investors to begin return to the name," they noted.
Yasin Ebrahim contributed to this report.