Microsoft's Q3 2025: Navigating Contradictions in AI Performance, Azure Growth, and Supply Challenges

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Microsoft Cloud Growth:
- Microsoft Cloud surpassed $42 billion in revenue, up 22% in constant currency.
- Growth was driven by the continued strength of Microsoft Cloud, which is seen as an essential input for businesses to expand output, reduce costs, and accelerate growth.

AI Platform and Tools Expansion:
- Foundry, the AI app factory platform, is now used by developers at over 70,000 enterprises.
- The expansion is attributed to the increasing adoption of AI applications and tools across various industries, with over 100 trillion tokens processed this quarter, a 5x increase year-over-year.

Cloud Migration and Data Center Demand:
- Microsoft saw accelerating demand for cloud migrations, with customers like Abercrombie & Fitch, Coca-Cola, and ServiceNow expanding their footprints on Azure.
- The growth in cloud migrations is driven by the increasing trust in Microsoft's cloud services, as well as its ability to host mission-critical workloads.

Data and Analytics Consumption:
- Microsoft Fabric, which integrates data workloads like data warehousing, data science, and real-time intelligence, has more than 21,000 paid customers, up 80% year-over-year.
- This growth is due to the increasing demand for advanced analytics and data solutions, as businesses seek to extract insights from their data for decision-making and operational efficiency.

AI Model and Infrastructure Development:
- Microsoft continues to expand its data center capacity, opening DCs in 10 countries across 4 continents.
- The expansion is supported by doubling model capabilities in performance every 6 months, driven by multiple compounding scaling laws, which are enhancing efficiency and reducing costs.