- Recent reports indicated Microsoft could be slowing its data center expansion
- But CEO said changes to its rollout strategy are all part of the plan
- The company's fiscal Q3 earnings beat Wall Street's expectations
Earlier this month, it looked as though there might be trouble in Microsoft’s AI-fueled paradise as reports surfaced that the company had slowed down or paused data center projects in several locations. But, to paraphrase Microsoft CEO Satya Nadella, it’s all just business as usual, baby.
During Microsoft’s fiscal Q3 earnings call this week, Nadella noted the tech giant actually opened data centers in 10 countries on four continents in the most recent quarter. And asked explicitly about the reports of a pullback, Nadella said the shifts were all just part of its effort to put the right resources in the right places.
“There’s a demand part to it. There is the shape of the workload part to it. And there is a location part to it,” he explained.
“You don’t want to be upside-down on having one big data center in one region when you have a global demand footprint," Nadella continued. "You don’t want to be upside-down when the shape of demand changes.”
CFO Amy Hood said that rather than pulling back on its data center growth, Microsoft is actually hustling to pull forward delivery of new capacity in certain areas. And even with that effort it expects to come up a bit short in terms of the compute needed to field demand for its cloud and AI services.
However, that’s not necessarily a bad thing as it indicates continued demand despite widespread economic uncertainty.
“We did see some increased demand, as you saw through the quarter,” she said. “We are going to be a little short, still, a little tight as we exit the year [in June], but are encouraged by that.”
The numbers you need to know
Data center strategy aside, Microsoft impressed investors with an earnings beat. Here are the numbers you need to know from the company’s fiscal Q3 2025.
- Revenue was up 13% to $70.1 billion
- Overall cloud revenue specifically was up 20% to $42.4 billion
- Intelligent Cloud revenue, which includes public, private and hybrid server products and cloud services, was up 21% to $26.8 billion
- Within Intelligent Cloud, Azure and other cloud services revenue was up 33%, though a breakout figure was not provided
- Though it didn’t break out AI revenue, Hood said commercial bookings increased 18%
- Profit rose 18% to $25.8 billion
- Capital expenditures were slightly lower than expected at $21.4 billion
- Microsoft’s Commercial bookings backlog grew 34% to $315 billion, with roughly 40% of that expected to be recognized as revenue in the next 12 months
- Like Alphabet/Google before it, Microsoft largely avoided tariff talk