Microsoft’s Q3 2025 Earnings Predictions Highlight Azure Growth
Microsoft (MSFT) is set to release its third-quarter fiscal 2025 results on April 30. Analysts anticipate that results will be significantly influenced by sustained growth in its cloud platform, Azure.
During the third quarter, Microsoft made notable advancements in artificial intelligence (AI), positioning Azure as central to its strategy. The company expanded the Azure AI Foundry platform with new models, including OpenAI o3-mini and DeepSeek R1, boosting its AI model catalog to over 1,800 options for enterprise customers. Additionally, Microsoft launched Azure AI Foundry Labs, facilitating swift delivery of innovative solutions like the Muse World and Human Action Model.
Intelligent Cloud Segment Expected to Lead Q3 Results
The Intelligent Cloud segment will likely be Microsoft’s primary growth driver, with revenue estimates ranging from $25.9 billion to $26.2 billion. Our model estimates this segment will generate around $26.06 billion, representing a 17.7% increase from the previous year. Azure’s revenue is projected to grow by 31-32% at constant currency, supporting Microsoft’s AI-centered approach.
Microsoft Corporation Price and EPS Surprise
Microsoft Corporation price-EPS surprise | Microsoft Corporation Quote
Strengthened Ecosystem Through Strategic Partnerships
In the fiscal third quarter, Microsoft enhanced its technology partnerships to reinforce its AI infrastructure. The expansion of its collaboration with NVIDIA (NVDA) includes the integration of NVIDIA NIM microservices and the NVIDIA AgentIQ toolkit into Azure AI Foundry. This enhancement aims to optimize efficiency for AI workloads. Furthermore, Microsoft announced the general availability of Azure ND GB200 V6 virtual machines, powered by NVIDIA’s Blackwell platform, to significantly elevate AI computing capabilities.
Additionally, Microsoft and SAP (SAP) launched the RISE with SAP on Microsoft Azure Global Acceleration Program, promoting a smooth transition to cloud solutions while maximizing SAP investments. These partnerships solidify Microsoft’s standing at the intersection of cloud infrastructure and enterprise applications, broadening its market reach.
Collaborative Ventures Enhance Competitive Edge
Several significant collaborations emerged in the quarter, strengthening Microsoft’s competitive position. The company extended its partnership with Anduril Industries to advance the U.S. Army’s Integrated Visual Augmentation System program, confirming Azure as the preferred cloud platform. Microsoft also established a $1 billion, seven-year partnership with WSP Global aimed at accelerating digital transformation in the architecture, engineering, and construction sector. Furthermore, Microsoft became a founding partner of the New Jersey AI Hub, joining forces with CoreWeave (CRWV) and Princeton University to enhance its AI ecosystem.
Advancements in AI and Automation
Microsoft introduced key innovations in autonomous AI capabilities during the upcoming quarter, featuring the Responses API and Computer-Using Agent in Azure AI Foundry. These developments empower AI systems to interact with software interfaces, execute tasks, and automate complex workflows. Additionally, Microsoft augmented its security offerings with AI agents in Microsoft Security Copilot, designed to manage high-volume security tasks, further positioning the company to meet rising demands for AI automation in business settings.
Progress in the Healthcare Sector
In healthcare, Microsoft unveiled Dragon Copilot, an AI assistant for clinical workflows that combines natural language voice dictation with ambient listening. This tool aims to alleviate clinician burnout, improve patient experiences, and drive financial performance for healthcare organizations, enhancing Microsoft’s offerings in this sector.
Investment Considerations
As Microsoft drives innovation in AI and builds strategic partnerships, investors may want to consider maintaining their current positions rather than expanding ahead of upcoming earnings. The stock appears to have priced in substantial AI-driven growth expectations. The anticipated Azure growth forecast of 31-32% will be crucial to monitor, as any shifts could impact market sentiment. Investors may benefit from waiting for clearer indications on the monetization of recent AI advancements before making further investments. Currently, MSFT holds a Zacks Rank #3 (Hold).
Additional Insights
This article originally published on Zacks Investment Research. The views expressed herein reflect the author’s opinions and do not necessarily align with those of Nasdaq, Inc.
