Microsoft (MSFT) didn’t just beat expectations in its fiscal third quarter — it delivered what Wedbush dubbed an “Aaron Judge-like” performance that could help reset the narrative around AI monetization.
Revenue hit $70.1 billion, up 13%, with Azure and other cloud revenue growing 33% year-over-year, a better clip than some analysts predicted. Nearly half of that cloud growth came from AI workloads.
Here are key takeaways investors are digesting Thursday morning:
Quarter and call suggest pipeline humming
On the earnings call, executives offered a confident and detailed account of accelerating enterprise demand. CFO Amy Hood emphasized that while most of the quarter’s upside came from non-AI services, digital-native companies are increasingly building everything — AI or not — in Azure. The result: a seamless pipeline converting Microsoft’s massive capital expenditures into revenue faster than skeptics expected.
Commercial bookings jumped 17% in constant currency, while Microsoft’s commercial remaining performance obligation (i.e., revenue that the company is contractually owed but hasn’t collected yet) surged 34% to $315 billion. That growing backlog signals a strong pipeline of future revenue.
Management cited enterprise wins, including Coca-Cola (KO), BNY Mellon (BK), and Abercrombie & Fitch (ANF), and noted that Microsoft now processes over 100 trillion tokens per quarter. Its internal Foundry AI platform has 70,000 enterprise developers onboard.
AI workloads becoming more cost-efficient
Cost and efficiency metrics also impressed. The cost per token (a key AI efficiency stat) has more than halved, while AI performance across Microsoft’s data center fleet is up 30% on the same power footprint.
Capital expenditures came in slightly below some forecasts, but Microsoft reaffirmed its $80 billion full-year FY25 guidance and expects spending to climb again in FY26 to meet hyperscale demand.
Wedbush raises MSFT price target upward of 8%
Wedbush raised its price target on the stock 8.4%, from $475 to $515, noting that chatter around potential data center pullbacks is now “put to rest.”
As the line between AI and non-AI workloads continues to blur — and AI demand proves strong even amid an uncertain macro picture — Microsoft looks to be increasingly positioning itself as the core infrastructure provider of the AI era.
In other words, hyperscaling has arrived — and it seems here to stay.
Microsoft shares are up 9% heading into Thursday’s market open, while Nasdaq futures are climbing 1.7%, and the S&P is up over 1%.