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Azure and other cloud services revenue surged 40 per cent, leading growth within the Intelligent Cloud segment, which posted USD 30.9 billion in revenue, up 28 per cent. The More Personal Computing division, which includes Windows, Xbox, and search advertising, inched up 4 per cent to USD 13.8 billion, helped by a 6 per cent rise in Windows OEM and Devices and a 16 per cent increase in search and news advertising. Adding to the concern, key partner OpenAI, which relies heavily on Microsoft’s cloud infrastructure, has reportedly committed to purchase over USD 1 trillion in computing power, raising questions about how it plans to finance such an ambitious commitment.
Microsoft reported stronger-than-expected results for the quarter ended September 30, 2025, powered by growing demand for artificial intelligence (AI) and cloud services. However, a record capital expenditure of nearly USD 35 billion, the highest in its history, spooked investors, sending shares down nearly 4 per cent in extended trading.
The tech giant’s revenue rose 18 per cent year-on-year (YoY) to USD 77.7 billion, while operating income climbed 24 per cent to USD 38 billion. Net income stood at USD 27.7 billion, up 12 per cent, while non-GAAP net income surged 22 per cent to USD 30.8 billion.
Earnings per share came in at USD 3.72 on a GAAP basis, up 13 per cent, and USD 4.13 on a non-GAAP basis, up 23 per cent.
“Our planet-scale cloud and AI factory, together with Copilots across high-value domains, is driving broad diffusion and real-world impact,” said Satya Nadella, chairman and CEO of Microsoft. “It’s why we continue to increase our investments in AI across both capital and talent to meet the massive opportunity ahead.”
AI Drives Cloud Boom
Revenue from the company’s flagship Microsoft Cloud business jumped 26 per cent to USD 49.1 billion, with commercial remaining performance obligations surging 51 per cent to USD 392 billion, reflecting robust customer demand for AI-enabled services.
Azure and other cloud services revenue surged 40 per cent, leading growth within the Intelligent Cloud segment, which posted USD 30.9 billion in revenue, up 28 per cent.
The Productivity and Business Processes segment, home to Office 365, LinkedIn, and Dynamics, rose 17 per cent to USD 33 billion. Within this Microsoft 365 Commercial cloud revenue grew 17 per cent, Microsoft 365 Consumer cloud jumped 26 per cent, LinkedIn rose 10 per cent, and Dynamics 365 increased 18 per cent.
The More Personal Computing division, which includes Windows, Xbox, and search advertising, inched up 4 per cent to USD 13.8 billion, helped by a 6 per cent rise in Windows OEM and Devices and a 16 per cent increase in search and news advertising.
Capex Surge Sparks Bubble Fears
While the results underscored Microsoft’s dominance in AI infrastructure, the company’s aggressive investment trajectory raised eyebrows on Wall Street. Microsoft said its capital spending would rise further this fiscal year, reversing earlier guidance that it would moderate.
Analysts noted that the company is racing to expand data center capacity to support generative AI workloads. Rival tech giants Alphabet and Meta Platforms have also warned of higher near-term infrastructure spending to overcome capacity bottlenecks.
The steep rise in AI infrastructure costs, coupled with soaring tech valuations and limited proof of near-term productivity gains, has reignited fears of an AI-driven investment bubble reminiscent of the late 1990s dot-com era.
Adding to the concern, key partner OpenAI, which relies heavily on Microsoft’s cloud infrastructure, has reportedly committed to purchase over USD 1 trillion in computing power, raising questions about how it plans to finance such an ambitious commitment.
Shareholder Returns Hold Steady
Despite the heavy investment outlay, Microsoft returned USD 10.7 billion to shareholders during the quarter through dividends and share buybacks.
“We delivered a strong start to the fiscal year, exceeding expectations across revenue, operating income, and earnings per share,” said Amy Hood, executive vice president and CFO. “Continued strength in the Microsoft Cloud reflects the growing customer demand for our differentiated platform.”
Credit: BW Online Bureau
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