Microsoft Stock Surges After Q3 2025 Earnings: What Separates ...
Microsoft stood out amongst its Big Tech peers Amazon and Alphabet this earnings season due to its strength and outperformance in the cloud. Notably, Microsoft Azure was the only cloud provider of the 3 platforms to see growth accelerate this quarter, highlighting Microsoft’s impressive earnings for Q3 2025. Not only did Azure separate itself with this 4-point sequential growth acceleration, but it also grew at more than 2x the rate of AWS and 7 points faster than Google Cloud, reaffirming the company’s momentum in the Azure vs AWS vs Google Cloud battle.
We highlighted Microsoft’s AI strategy and its potential to dominate AI for our premium members in April 2022 prior to Chat-GPT 3’s release, repeating this thesis in October 2022, labeling Microsoft a “sleeping AI giant” when shares were trading at $247.
Azure’s Unexpected Growth
Azure’s growth was expected to be weak this quarter, with numerous analyst notes raising concerns about Azure’s growth heading into Q3’s report, noting that macro headwinds could weigh on growth. Many analysts had forecast growth of 30% to 31% in constant currency, at or below Microsoft’s guidance for 31% to 32% growth.
However, Azure reported quite the opposite as growth accelerated to 35% in constant currency -- well ahead of the guide and analyst expectations. Azure benefited as Microsoft brought capacity online faster than expected in the quarter, to meet high demand for AI services. AI contributed 16 points of growth in the quarter, compared to 13 points last quarter and 10 points of growth a year ago.
Microsoft's Dominance in AI
Azure’s growth was expected to be weak this quarter, with numerous analyst notes raising concerns about Azure’s growth heading into Q3’s report, noting that macro headwinds could weigh on growth. Many analysts had forecast growth of 30% to 31% in constant currency, at or below Microsoft’s guidance for 31% to 32% growth.
However, Azure reported quite the opposite as growth accelerated to 35% in constant currency -- well ahead of the guide and analyst expectations. Azure benefited as Microsoft brought capacity online faster than expected in the quarter, to meet high demand for AI services. AI contributed 16 points of growth in the quarter, compared to 13 points last quarter and 10 points of growth a year ago.
Microsoft's Partnership with OpenAI
Microsoft is benefiting from increased usage by its strategic partner OpenAI, not only due to its ownership stake and revenue-sharing agreement but also due to the sharp rise in ChatGPT usage and token generation as OpenAI’s APIs are exclusive to Azure. The partnership with OpenAI has been a strong driver for Azure as it continues to capture a significant share of the AI market.
OpenAI is projecting substantial revenue growth over the next four years, representing a large revenue opportunity for Microsoft. The partnership between Microsoft and OpenAI is expected to drive further innovation and growth in the AI space.
Overall, Microsoft’s impressive performance in Q3 2025 and its strategic initiatives in the cloud and AI sectors are setting the company apart from its competitors and positioning it for continued success in the future.
