Microsoft is set to release its third quarter earnings after the bell on Wednesday, with Wall Street closely watching for evidence that the company’s significant investments in AI data centers are yielding results. The report comes amid a backdrop of economic uncertainty, particularly due to President Trump’s “Liberation Day” tariffs, which could impact enterprise spending on cloud and AI initiatives.
Analysts estimate that 10%-15% of cloud and AI projects in the US might be delayed or slowed due to the current uncertainty. This concern is compounded by Microsoft’s recent decision to slow or pause some early-stage AI projects, as noted by Noelle Walsh, president of Microsoft Cloud Operations and Innovation. Additionally, the company has been contending with AI capacity constraints that limit its ability to meet customer demand for AI services.
For Q3, Microsoft is expected to report earnings per share (EPS) of $3.21 on revenue of $68.4 billion, according to Bloomberg consensus estimates. This represents a significant increase from the same quarter last year, when the company reported EPS of $2.94 on revenue of $61.8 billion. The commercial cloud revenue is anticipated to reach $42.2 billion, up from $35.1 billion in Q3 2024.
Key Financial Projections
- Productivity and Business Processes: Expected to reach $29.6 billion, a 9.8% increase
- Intelligent Cloud: Anticipated growth of 18.2%
- Azure Revenue: Expected to grow by 30.9%, with AI-related revenue increasing by 15.6%
- More Personal Computing: Forecasted revenue of $12.6 billion, up less than 1% year-over-year
Investors will be focusing on Microsoft’s forward guidance to gauge the potential impact of tariffs on future quarters. The upcoming earnings report will be crucial in understanding how Microsoft is navigating the current economic landscape and whether its AI investments will continue to drive growth.
