Microsoft $MSFT reported fiscal third-quarter revenue of $82.9 billion, up 18% from the same period a year earlier, with earnings per share of $4.27 on a GAAP basis, up 23% year over year. Wall Street had been looking for revenue of $81.39 billion and earnings of $4.06 per share, per CNBC.

Compared with $25.82 billion earned in the same period last year, net income climbed to $31.78 billion in the quarter that closed March 31. Microsoft returned $10.2 billion to shareholders through dividends and stock repurchases during the quarter.

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Microsoft's AI business surpassed an annual revenue run rate of $37 billion, up 123% year over year, CEO Satya Nadella said in a statement. Adoption of the 365 Copilot AI add-on for commercial Office users has reached more than 20 million seats, a jump from the 15 million figure the company shared in January, according to CNBC.

Growth of 40% in Azure and other cloud services cleared the roughly 39% analysts had penciled in. Revenue for the wider Intelligent Cloud segment — covering Azure, server products, and the GitHub and Nuance cloud services — came in at $34.68 billion, a 30% increase from a year ago.

At $35.01 billion, up roughly 17%, the Productivity and Business Processes segment — home to Office software, LinkedIn, and Dynamics — topped analyst forecasts. Microsoft 365 Consumer cloud revenue grew 33%, while Dynamics 365 revenue rose 22%. LinkedIn revenue increased 12%.

Total Microsoft Cloud revenue hit $54.5 billion, a 29% gain, while the company's commercial remaining performance obligations — which include both unearned revenue and future-recognized amounts — reached $627 billion, reflecting a 99% increase year over year.

The More Personal Computing unit, which covers Windows, Xbox, Surface, and Bing search advertising, brought in $13.19 billion, down 1% from last year but above the $12.73 billion expected by Wall Street. Windows licensing revenue fell 2%, Xbox content and services dropped 5%, while search advertising revenue, excluding traffic acquisition costs, rose 12%.

Capital expenditures and finance leases totaled $31.9 billion for the quarter, up 49%, but still below the $34.9 billion analysts expected, according to CNBC. The company’s gross margin was 67.6%, its lowest since 2022, due to higher depreciation from building new data centers.

CFO Amy Hood said in a statement that results exceeded expectations across revenue, operating income, and earnings per share, "reflecting strong execution and growing demand for the Microsoft Cloud."

Microsoft's AI business surpassed a $37 billion annual run rate as cloud growth beat forecasts

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