Microsoft reports strong cloud growth in Q3 earnings

Microsoft just posted the 3rd 4th of its 2025 fiscal fiscal results. The bundle shaper made $70.1 cardinal successful gross and a nett income of $25.8 cardinal during Q3. Revenue is up 13 percent, and nett income has accrued by 18 percent. Microsoft was expected to study $68.42 cardinal successful revenue, truthful the results person beaten Wall Street expectations.

Cloud maturation appears to beryllium the main operator of improved revenues, with wide Microsoft Cloud gross reaching $42.4 billion, up 20 percent. Microsoft hasn’t divided retired its AI revenues, truthful it’s inactive unclear precisely however overmuch that portion of its concern is growing, though.

With each eyes connected the interaction of the Trump tariffs and user spending, Microsoft besides reported Windows OEM and devices gross maturation of 3 percent year-over-year. Businesses and consumers are upgrading PCs and laptops up of the Windows 10 extremity of beingness successful October, but determination hasn’t been a large upswing successful Windows OEM gross yet. Microsoft does accidental that Windows OEM maturation was partially down to “inventory levels remaining elevated owed to tariff uncertainty.”

Microsoft present combines Surface gross with Windows OEM revenue, truthful it’s nary longer wide precisely however its Surface enactment is doing. Microsoft hasn’t launched immoderate caller user Surface devices successful the caller quarter, but the institution did commencement selling Intel-powered versions of the Surface Pro 11 and Surface Laptop 7 successful February for businesses. Microsoft is besides rumored to beryllium launching smaller versions of the Surface Pro and Surface Laptop soon.

On the gaming side, Microsoft warned past 4th that Xbox hardware gross would diminution and it has again. Xbox hardware is down 6 percent this quarter, successful a play erstwhile Microsoft has been launching a assortment of games into Game Pass. Overall gaming gross astatine Microsoft is up 5 percent.

Xbox contented and services, which includes Game Pass, is up 8 percent, though. Microsoft isn’t revealing immoderate caller Game Pass subscriber numbers though, and the past clip we got an update was successful February 2024 erstwhile Microsoft revealed determination were 34 cardinal subscribers, including the Xbox Game Pass Core (previously Xbox Live Gold) members.

Over the past twelvemonth Microsoft has been pushing up with its strategy to bring much antecedently Xbox-exclusive games to PlayStation and Nintendo Switch. The determination has proven to beryllium a palmy one, with preorders for Indiana Jones and the Great Circle and Forza Horizon 5 topping Sony’s ain PlayStation Store past month.

Microsoft’s Xbox everyplace strategy — which I’ve been covering intimately in my Notepad newsletter over the past twelvemonth — volition besides see titles for the Nintendo Switch 2. Microsoft is preparing a akin database of games to larboard implicit to the Switch 2 this year.

As is ever the lawsuit for Microsoft’s earnings, the company’s Office and unreality businesses are erstwhile again the stars of the show. Microsoft 365 commercialized products and unreality services gross accrued 11 percent twelvemonth implicit year, and adjacent bureau user is up 10 percent successful revenue. Microsoft 365 user subscribers are up to 87.7 cardinal now.

Microsoft bundled its Office AI features into Microsoft 365 Personal and Family subscriptions earlier this twelvemonth and raised prices. Previously, Microsoft 365 subscribers had to wage an other $20 per period to get Copilot wrong Office apps similar Word, Excel, and PowerPoint as part of a Copilot Pro subscription, but Microsoft present offers these AI features wrong Microsoft 365 apps for an other $3 per month.

Existing subscribers person been capable to opt retired of the AI features and not endure the terms increase, but it’s not wide however galore person really decided to bash that. Microsoft does enactment that it has seen “growth successful gross per user” from the January terms increase, which has been partially offset by a “continued premix shift” to the $1.99 monthly Microsoft 365 Basic subscription.

Microsoft’s revenues successful what it calls intelligent unreality person accrued by 21 percent year-over-year to $26.8 billion, which is precisely treble the gross generated by Windows, Xbox, and hunt and quality advertizing (more idiosyncratic computing). Server products and unreality services gross accrued 22 percent, with Azure maturation of 33 percent.

Microsoft volition present clasp an net telephone astatine 5:30PM ET and we’ll update this nonfiction with immoderate applicable comments from Microsoft CEO Satya Nadella and CFO Amy Hood.