Microsoft Posts Strong Q3 Earnings, Boosting Stock and Price Target

Microsoft shares rose slightly in after-hours trading on Wednesday following the company’s better-than-expected third-quarter results and accelerated growth in its Azure cloud business. Revenue for the quarter ended September rose 19% year-over-year to $92.28 billion, surpassing the LSEG consensus estimate of $90.69 billion. Adjusted earnings per share reached $4.92, a 32% increase from the prior year, exceeding the $4.73 consensus forecast. Azure revenue grew 48% year-over-year, outpacing FactSet expectations of approximately 44%–45%.

Microsoft’s stock had declined about 25% earlier in the year due to concerns about AI competitiveness, subscription model risks, and innovation gaps. This changed starting in July, driven by accelerated Azure growth, expanding Copilot adoption, and disciplined capital spending. The stock surged 51% from its June low to Wednesday’s close, reaching record levels.

Azure revenue totaled $33.17 billion in the quarter, up from $22.38 billion in the prior year, following enhanced capacity deployment despite third-party delays. Gains in GPU efficiency enabled higher revenue per token, suggesting improved capital efficiency. Copilot, Microsoft’s AI-powered assistant, saw daily users increase 50% year-over-year, with satisfaction hitting an all-time high.

Capital expenditures totaled $45.2 billion, below the $51 billion analyst forecast and $50 billion management projection, with $170 billion planned for the full year. Free cash flow remained positive, supporting continued AI investments and $2.9 billion in share repurchases—a contrast to equity dilutions by Meta and Alphabet. CFO Amy Hood noted potential access to additional funding if advantageous but emphasized avoiding dilution risks.

For the current quarter, Microsoft forecasts total revenue of $96 billion–$97.1 billion, above the $95.6 billion consensus. Azure growth is projected at 49%-50% in constant currency, exceeding the 46% FactSet estimate. Ahead of the report, the company raised its price target to $580 from $550, maintaining a “Buy” rating.

Microsoft remains a core player in productivity (Office 365) and cloud services (Azure), while expanding its AI footprint through OpenAI investments and gaming revenue streams via recurring models. Analysts highlight the stock’s resilience and disciplined growth as key differentiators amid sector volatility.

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