Microsoft’s AI Spending Overshadows Strong Azure Performance

Microsoft Corp. reported robust third-quarter earnings, surpassing analyst expectations with adjusted EPS of $4.13 against a projected $3.67. Revenue hit $77.7 billion, exceeding the $75.4 billion consensus. Azure AI services showed particular strength, reflecting growing enterprise adoption of cloud-based artificial intelligence solutions.

Despite these results, shares fell 5% as investors focused on escalating AI infrastructure costs. CFO Amy Hood revealed Azure growth at 37% in constant currency, noting demand continues to outstrip capacity. CEO Satya Nadella announced plans to increase AI capacity by 80% this year, requiring significant capital expenditure for data center expansion.

The market's reaction highlights the tension between current profitability and future investments in AI infrastructure. Microsoft's cloud dominance positions it as a key beneficiary of enterprise AI adoption, but the path to monetization remains capital-intensive.