• Microsoft's sales expected to gain 12% in constant currency to $68.5 billion, with solid Azure growth

• Adjusted EPS may climb 10% vs. 20% a year earlier, with slight operating margin contraction

• Consensus sees adjusted operating margin falling 55 bps to 44%, with increase in cost of revenue as portion of sales

Microsoft will report its third quarter fiscal 2025 financial results after the market closes on Wednesday, April 30, 2025.

Microsoft's Q3 revenue is expected to be $68.475 billion, adjusted net income is $24.043 billion, and adjusted EPS is $3.225, according to Bloomberg's consistent expectations.

What to Look for in Q3 2025?

Microsoft's Cloud Unit Expected to Meet Expectation

Previous robust commercial bookings and recent performance from OpenAI could help Microsoft's cloud unit meet or slightly exceed consensus for 30.5% constant currency growth in fiscal 3Q as well as help offset areas more susceptible to a weakening economy, such as new PC or Office sales. The company's AI revenue is primarily inference-related, powered by OpenAI, which has fueled cloud commitments and has experienced a recent demand spike due to image generation.

Analysts expect Azure to maintain strong growth, potentially in the low-to-mid 30s. It is expected that support in Azure will lead Microsoft to reaffirm its pace of double-digit total sales growth in fiscal 2025. Operating margin could be 44-44.5% in 2H as the company offsets gross margin pressure from increasing cloud sales with greater cost management.

Microsoft’s Expensive Data Center Expansion Hits a Roadblock

Microsoft, which pledged to spend $80 billion on data centers in the fiscal year ending in June, has scrutinized its worldwide footprint of these server farms in recent months. The software giant has walked away from negotiations for leased deals and delayed construction on some sites it owns.

Many investors have taken Microsoft’s pullback as a kind of signal on artificial intelligence demand — they worry that the company’s projections for revenue growth tied to AI doesn’t justify the kind of outlays we’ve been seeing.

Microsoft could be experiencing less demand from OpenAI specifically as the startup seeks computing power through the Stargate joint venture, without any changes to demand among other customers.

Microsoft's Guidance in Focus Amid Market Uncertainty

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. 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.

Analysts' Opinions

Goldman Sachs trimmed its price target on MSFT to $450 from $500 but kept a Buy rating on the shares. The investment bank predicted that Microsoft's earnings growth would jump to 17% in its fiscal 2026, up from 10% in FY25.

Microsoft's profits next year should be lifted by its AI inference offerings, which tend to have high margins, Goldman Sachs stated. Also positive for MSFT will be its revenue-sharing deal with OpenAI and the transition of AI to platforms and applications, the investment bank believes.

Goldman expects the revenue of Azure, MSFT's cloud-infrastructure unit, to come in slightly above expectations for the current fiscal year, and it predicts that the company's overall FY25 earnings per share will also be a bit above analysts' average estimate.

Analysts at Evercore ISI believe the company has a chance to reset expectations—particularly around Azure—and potentially pave the way for a rebound.

The firm, led by analyst Kirk Materne, said Microsoft had previously set a high bar by guiding toward acceleration in Azure growth for the second half of the fiscal year. Now, with the macro environment tightening, Evercore expects the company will use this quarter to lower those expectations and reframe the narrative.

"AI-related demand should remain solid, thanks in part to ChatGPT, but the non-AI parts of Azure could face pressure,” Materne said in a note to clients. He added that Azure guidance in the high 20% range, versus the Street's current expectation in the low 30% range, would be seen as more achievable and could help shift investor sentiment more favorably toward fiscal Q4.