Microsoft delivered stronger-than-anticipated quarterly financial results on Wednesday while simultaneously warning investors of massive impending infrastructure costs. The tech giant revealed that its total revenue jumped by 18% year on year during the quarter ending on March 31.
Net income surged to $31.78 bn or $4.27 per share compared with $25.82 bn or $3.46 per share during the same period last year. These adjusted earnings specifically exclude a minor $14 mln dip in net income linked to Microsoft’s investments in OpenAI.
The company experienced exceptional performance across its core divisions. Revenue from Azure and other cloud services skyrocketed by 40% to easily beat analyst forecasts.
Consequently the entire Intelligent Cloud division which encompasses Azure, server products and various cloud services generated $34.68 bn in revenue. Similarly the Productivity and Business Processes segment, home to Office software, LinkedIn and Dynamics, saw a 17% increase to reach $35.01 bn. Both divisions outperformed market consensus comfortably.
Mounting infrastructure costs
Despite the impressive top-line growth there are clear signs of rising operational pressures. Gross margins narrowed to 67.6% which is the tightest seen since 2022 due to mounting depreciation costs from massive data centre expansions. Microsoft reported $31.9 bn in third-quarter capital expenditure and finance leases.
Looking ahead finance chief Amy Hood projected a staggering $190 bn in capital expenditure for 2026 representing a 61% increase from 2025. Hood explained during an earnings call that a global squeeze on memory components caused by intense AI demand will add roughly $25 bn to these infrastructure costs alone.
Across the wider technology sector infrastructure providers are being forced to pay premium prices to secure the hardware necessary for advanced artificial intelligence processing.
Cautious guidance and headcount reductions
Looking towards the fourth fiscal quarter Microsoft issued slightly cautious guidance. Hood forecast revenue between $86.7 bn and $87.8 bn with the midpoint falling marginally below Wall Street expectations. The projected operating margin is also expected to contract slightly from 46.3% down to 44%.
However the company anticipates sustained strength in its cloud sector predicting Azure growth of between 39% and 40% at constant currency.
In a bid to manage these rising costs and shifting industry priorities Microsoft confirmed that its overall headcount will decrease year on year by the end of the 2027 calendar year in June. Addressing this ongoing operational shift Hood noted that the corporation continues to evolve its working practices to enhance overall pace and agility.
From economics and politics to business, technology and culture, Kursiv Uzbekistan brings you key news and in-depth analysis from Uzbekistan and around the world. To stay up to date and get the latest stories in real time, follow our Telegram channel.
