Microsoft tops 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 topping the company’s own forecast, giving the tech giant a new answer to questions about its ability to translate record capital spending on AI infrastructure into stronger financial results.

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

AI run rate: In its earnings news release, Microsoft also disclosed that its AI business has reached an annual revenue run rate of $37 billion, up 123% from a year ago. It’s the first time the company has updated the figure since it reported a $13 billion run rate in January 2025.

Capex trends: Capital spending came down to $31.9 billion from $37.5 billion the previous quarter. Microsoft had said the decline would come and that it reflected the timing of data center construction and hardware deliveries, not a slowdown in demand for cloud and AI services.

Copilot: For 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 on its paid enterprise AI plan.

Cloud overall: Microsoft Cloud revenue, which includes Azure, commercial Microsoft 365, LinkedIn, and Dynamics 365, rose 29% to $54.5 billion. The company’s remaining performance obligations, a measure of contracted future revenue, was $627 billion, with a significant part of that backlog tied to OpenAI.

Elsewhere in Microsoft’s business:

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

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

Investors focused on the record capital spending, a Copilot product that had reached just 3.3% of Microsoft 365’s commercial base at that time, and a revenue backlog heavily dependent on OpenAI.

The OpenAI relationship has shifted significantly since then.

This week, the two companies restructured their partnership, with OpenAI ending its exclusive commitment to Microsoft’s Azure cloud and gaining the ability to run its products on other platforms, notably Amazon Web Services. Microsoft, in turn, locked in its revenue-sharing arrangement and removed a clause that could have ended it if OpenAI had declared artificial general intelligence.

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