April 30 (Reuters) - Microsoft (MSFT.O) predicted stronger-than-expected growth for its Azure cloud business on Wednesday, following impressive quarterly results. This eased investor concerns about an uncertain economy and drove its stock up 7% in after-hours trading. Microsoft's performance, echoing similar results from Google last week, may alleviate worries about a potential slowdown in AI demand. Some analysts had raised concerns about canceled data-center leases at Microsoft, interpreting them as signs of excess capacity. Additionally, concerns over the impact of U.S. tariffs on business spending were softened by strong advertising sales at Meta Platforms, suggesting that such effects were not yet evident.

Microsoft's stock surge set the company on track to add over $200 billion to its market value. The company's Azure division saw a 33% increase in revenue for the third quarter ending March 31, surpassing the forecasted 29.7%, with AI contributing 16 percentage points to the growth, up from 13 points in the previous quarter.

Microsoft also projected cloud-computing revenue growth of 34% to 35% for the fiscal fourth quarter, which is well above analyst expectations, forecasting a range between $28.75 billion and $29.05 billion. Commercial bookings, which reflect new contracts with business customers, grew 18% in the third quarter, partly driven by a new Azure deal with OpenAI, the creator of ChatGPT. However, Microsoft did not disclose the deal's size or its exact contribution to Azure sales.

Amy Hood, Microsoft's CFO, stated that while AI contributed to Azure’s performance, the real growth was driven by the non-AI aspects of the business. CEO Satya Nadella clarified that Microsoft's data center plans are constantly evolving, and analysts have only recently started focusing closely on these adjustments.

Microsoft reported earnings of $3.46 per share, exceeding the expected $3.22, and a 13% revenue increase to $70.1 billion, with the Intelligent Cloud division, which includes Azure, contributing $26.8 billion. The company’s capital expenditures surged 53% to $21.4 billion, though spending on longer-term assets decreased.

Looking ahead, Hood mentioned that capital expenditures will continue to grow in fiscal 2026 but at a slower pace, with a greater focus on shorter-lived assets like chips rather than data center buildings. This shift reflects Microsoft’s heavy investment in AI infrastructure, which relies on technologies like CPUs and GPUs from companies such as Intel, AMD, and Nvidia.

Microsoft’s expansion of AI and data-center capabilities has been a key focus, and any slowdown in Big Tech's AI investments could have significant effects on chip suppliers like Nvidia and the broader U.S. economy. J.P. Morgan analysts estimated that data-center spending could contribute between 10 and 20 basis points to U.S. economic growth in 2025-2026.