Microsoft Q3 earnings preview: Cloud growth and AI investments in focus

When will Microsoft report it's Q3 earnings?

Microsoft is scheduled to report its third-quarter (Q3) earnings for 2025 on Thursday, 1 May at 6.05am (AEST), after the market closes.

Key financials

Wall Street's expectations for the upcoming results are as follows.

• Earnings per share: $3.22 vs. $3.23 in Q2
• Revenue: $68.42 billion vs. $69.63 billion in Q2

However, Microsoft's share price dived 6.18% in the next session to $414.99 as investors focused on its disappointing cloud results and soft guidance. Revenue from the company's Intelligent Cloud segment, which includes Azure, increased 19% during the quarter to $25.54 billion, below the consensus forecast of $25.83 billion.

Given its intense competition with Amazon Web Services and Google for dominance in AI workloads, Microsoft's cloud division is under scrutiny. All three tech giants are investing substantial resources into enhancing their AI capabilities. Satya Nadella, Microsoft's Chairman and Chief Executive Officer said “Already, our AI business has surpassed an annual revenue run rate of $13 billion, up 175% year-over-year.”

Summary of Microsoft's FY25 Q2 results

A closer look at the details

Within the details, Microsoft reported the following highlights.

• Revenue from Microsoft's Intelligent Cloud segment was $25.5 billion, representing a 19% increase. Within that, Server products and cloud services revenue increased by 21%, driven by Azure and other cloud services revenue growth of 31%

• Revenue in productivity and business processes was $29.4 billion, representing a 14% increase. Within that, revenue from Office Commercial products and cloud services increased by 15%, driven by a 16% growth in Office 365 Commercial revenue

• Revenue in more personal computing was $14.7 billion, relatively unchanged. Within that, Windows OEM revenue increased 4%, and Xbox content and services revenue increased 2%

Intelligent Cloud highlights

What to look for in Q3 2025?

In its Q2 earnings call, Microsoft provided Q3 guidance of $67.7 billion to $68.7 billion, less than the $69.78 consensus forecast.

Close attention will be paid to the following drivers.

• Cloud services growth: analysts expect Azure to maintain strong growth, potentially in the low-to-mid 30s, and will look for outperformance relative to competitors like Amazon Web Services and Google Cloud

• AI investment and development: Microsoft’s heavy investments in AI, including tools like Microsoft 365 Copilot and Azure OpenAI Service, are under scrutiny. Investors want to see evidence that these investments are translating into meaningful revenue

• Gaming and Xbox performance: with an increasing focus on gaming, particularly through Xbox, subscriber growth and game releases will be of interest

• Guidance and outlook: Microsoft's forward-looking statements and guidance will be scrutinised to assess management's expectations for future growth and any strategic shifts in response to shifting competitive and macroeconomic challenges

What about the impact of tariffs on Microsoft?

Microsoft is less likely to be heavily impacted by tariffs than other major tech companies, but it is not entirely immune.

Microsoft’s core revenue comes from enterprise software and cloud services (e.g., Azure, Microsoft 365, Dynamics 365), which account for roughly 74.4% of its net sales. Unlike physical goods, software and cloud services are less directly affected by tariffs, as they are intangible and not subject to import duties.

The more likely risk to Microsoft is that tariffs and trade policy trigger a broader economic slowdown, with JPMorgan estimating a 60% chance of a global recession. If Microsoft’s enterprise customers face margin pressures or budget cuts, they may delay or reduce spending on cloud and software subscriptions, indirectly affecting Microsoft’s top line. Secondly, potential retaliatory tariffs from the EU or China could target Microsoft’s services, especially given past EU fines on US tech firms.

Microsofts revenue

Microsoft has a TipRanks Smart Score of ’9 Outperform’ and is rated as a ‘Buy’ by analysts with 32 ’Buy’, 4 ‘Hold’ and 0 ‘Sell’ recommendations - as of 23 April 2025.

Microsoft technical analysis

Microsoft’s share price has fallen 12.97% this year and is trading ~22% below its $468.35 record high from July 2024. In early April it bounced from a new 52 week low of $344.79 after running into buyers operating ahead of the 200-week moving average at $336.54. We see the move from the December $456.16 high to the $344.79 low as the third leg or Wave C of a three-wave ABC correction.

Microsoft weekly chart

If the Microsoft share price can hold above the $344.79 low, and rebound above resistance at $395/$405, and then above the 200-day moving average at $416, it would indicate that the correction in the Microsoft share price is complete at the $344.79 low and indicate that a retest of the $468.35 record high is underway.

Microsoft daily chart