Microsoft reported a $36.6 billion profit for the three months through September, a jump driven by its cloud computing business, just days after telling staff it would offer buyouts to roughly 60,000 workers — more than a quarter of its global headcount — to cut costs.
The results, released Wednesday, showed quarterly revenue of $92.3 billion, up 19% from a year earlier. Microsoft Cloud, the company's bundle of enterprise cloud services, grew 30% and was the main driver of the beat. Shares rose almost 2.9% in after-hours trading in New York.
A Tale of Two Earnings Reports
The results landed in sharp contrast to Alphabet's. Google's parent company, which also reported Wednesday, said quarterly net profit fell 25% from a year earlier, and its shares fell 9.75% as investors balked at the company's plan to keep spending heavily on artificial intelligence infrastructure even as returns lag.
Microsoft's own AI spending is enormous — the company flagged "substantial investments" in AI as a risk factor in its filings — but investors rewarded the quarter anyway, largely because the cloud growth numbers suggest that spending is translating into paying customers. Big tech companies including Amazon, Meta and Alphabet are expected to collectively spend more than $700 billion this year on AI chips and data centers, and Wall Street has grown increasingly nervous about whether that outlay will pay for itself.
Microsoft chief executive Satya Nadella said AI adoption had delivered "real-world impact across every industry," pointing to the cloud unit's growth as evidence that enterprise customers are converting pilot projects into paid contracts.
Buyouts Land Alongside Record Profit
The earnings arrived only two days after Microsoft told staff it would extend a voluntary redundancy offer to employees across Canada, India, the UK and the US, part of an effort to adapt its workforce to what the company called "changing needs." Microsoft currently employs more than 220,000 people worldwide; the buyout offer covers close to a quarter of that total, though the company has not said how many workers it expects to actually leave.
Microsoft framed the move as creating "greater flexibility" for the business while giving departing staff financial support and career-planning resources. The timing — a blockbuster earnings report landing days after a mass workforce reduction was announced — has drawn criticism from labor advocates, who argue that companies are using the AI boom to justify job cuts even as profits climb.
Microsoft's cloud division, Azure, has been the main battleground in its rivalry with Amazon Web Services and Google Cloud, and all three companies have been racing to lock in long-term AI compute contracts with corporate customers. Wednesday's divergence between Microsoft and Alphabet suggests investors are now drawing sharper distinctions between AI spending that shows up in revenue and spending that remains speculative.
Analysts will be watching Microsoft's next earnings call for more detail on how many employees ultimately take the buyout, and whether the company's AI capital expenditure continues to climb in tandem with cloud revenue. Amazon reports its own third-quarter results Thursday, in what has become a weekly ritual of investors trying to work out which AI bet is paying off and which is just burning cash — and a separate newsroom's read on why Microsoft's spending discipline eased some of that unease is worth a look for anyone trying to track where the AI-spending debate goes next.
