“Cloud sales, cloud sales, cloud sales” is the new “Developers, developers, developers.”

☁️ Azure Steals the Spotlight

  • Microsoft shares surged as much as 10% in after-hours trading after the software giant delivered another blockbuster quarter and, more importantly, an even bigger outlook.
  • Investors had been waiting for proof that billions spent on AI infrastructure were paying off. Microsoft brought the receipts.
  • The company forecast 45% Azure revenue growth on a constant-currency basis for the current quarter, comfortably ahead of analysts' expectations for 41%.
  • Constant currency removes the impact of exchange-rate swings, giving investors a cleaner view of underlying business growth.
  • The guidance also helped knock down one of Wall Street's biggest concerns: that hyperscalers were spending fortunes on AI without generating enough revenue in return. At least for Microsoft, the cloud engine is humming.

📈 Earnings Crush Expectations

  • Microsoft reported earnings per share of $4.81, topping expectations of $4.24 and climbing from $3.65 a year earlier. Revenue reached $90 billion, beating forecasts of $87.6 billion and rising 18% year over year.
  • Part of the earnings boost came from an accounting gain tied to Microsoft's investment in Anthropic. The AI startup's valuation jumped from $350 billion to $900 billion during the quarter, generating an unrealized gain of $3.2 billion for Microsoft.
  • An unrealized gain is an increase in the value of an investment that hasn't been sold yet. It looks good on the income statement, but it isn't cash sitting in the bank.

💰 Spending Big, Earning Bigger

  • Microsoft spent roughly $41 billion on capital expenditures during the quarter, bringing fiscal-year capex to $145 billion as it continued building AI infrastructure and expanding its global data-center footprint.
  • That spending squeezed free cash flow, which fell 23% year over year to $19.6 billion. Even so, the figure comfortably beat analyst expectations of $13.4 billion, suggesting the investment spree remains financially manageable.
  • Unlike some peers that have unsettled investors with ever-rising AI budgets , Microsoft left its capex outlook unchanged while raising growth forecasts.