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Microsoft surpassed analysts' estimates for the second quarter on Wednesday, led by strong growth from its Azure cloud-computing unit, as business demand for its artificial intelligence services heats up.
Total revenue rose 18% year-over-year to $76.4 billion, beating estimates by the 16 analysts surveyed by Zacks Investment Research, who projected an increase of 13.9% compared to the year-ago quarter, which was also in line with the companys own forecast.
Azurethe world's second-largest cloud platformsaw its revenue increase 39%, taking the unit's total revenue to more than $75 billion for the fiscal year ending June 2025. That outpaces Visible Alpha estimates of 34.75% for the quarter, and $74.62 billion for the year.
"In our view, the investor bogey is for constant currency Azure growth of 36%," UBS analyst Karl Keirstead had said in a client note Tuesday, which the company has surpassed by a margin.
Microsoft's shares jumped more than 7% in after hours trading, capping off year-to-date gains of more than 20%.
Cloud and AI is the driving force of business transformation across every industry and sector," said Satya Nadella, chairman and chief executive officer of Microsoft in a release. Indeed, organizations such as the NBA and Fujitsu use services like Azure OpenAI to streamline operations and improve productivity, while firms like Novartis, UPS, and Mercedes-Benz use Azure to build and scale their AI tools.
Diluted earnings per share reached $3.65, up 24% year-over-year, beating analyst estimates of $3.35 and 13.6% respectively, according Zacks Investment Research.
However, capital spending ticked upwards, rising 27% to $24.2 billion, compared with estimates of $23.08 billion, per consensus among Visible Alpha analysts. Microsoft has heavily invested in data centers this year in order to scale Azure capacity. We do have demand that exceeds our supply by a bit, Microsoft Chief Financial Officer Amy Hood told analysts on an earnings call last April.
To combat this bottleneck, the tech giant has pledged $80 billion across fiscal year 2025 to build centers "to train AI models and deploy AI and cloud-based applications" around the world, a bet which paid off during the previous quarter.
