What happened

Shares of Microsoft (MSFT 1.82%) charged sharply higher Wednesday morning, surging by as much as 8.8%. As of 12:44 p.m. ET, the stock was still up by 8.3%.

The catalysts that sent the tech giant higher were quarterly financial results that easily outpaced expectations.

So what

In its fiscal 2023 third quarter (which ended March 31), Microsoft's revenue grew 7% year over year to $52.9 billion. When factoring out foreign currency headwinds, the growth was an even more robust 10%. The better than expected results carried through to the bottom line, as diluted earnings per share (EPS) rose 10% to $2.45, or 14% on a constant-currency basis.

Investors breathed a sigh of relief, having feared the worst. For context, analysts' consensus estimates were for revenue of $51 billion and EPS of $2.24. But Microsoft showed the resilience of  its business, even in the face of macroeconomic headwinds. 

Each of its major business segments outpaced expectations, but the headliner was Azure Cloud, where revenues grew by 31% year over year on a constant-currency basis, far better than Wall Street's expectations for growth of 27%.

CEO Satya Nadella was enthusiastic about the pivot toward artificial intelligence (AI). "Across the Microsoft Cloud, we are the platform of choice to help customers get the most value out of their digital spend and innovate for this next generation of AI," he said. 

Another factor that may have influenced the stock price move was the news that the U.K.'s antitrust regulator had blocked Microsoft's pending $69 billion acquisition of Activision Blizzard (ATVI). The Competition and Markets Authority said the merger would harm competition in gaming, particularly in the cloud gaming segment. Microsoft and Activision Blizzard both plan to appeal the decision.

Now what

The Federal Reserve intensified investors' fears of a recession earlier this month when it said it expects a mild downturn later this year. That, combined with an ongoing narrative that businesses would dial back their cloud spending in response to economic headwinds, had many investors expecting an ugly quarterly report from Microsoft.

Yet, Microsoft's outlook was surprisingly robust. Management is guiding for fiscal Q4 revenue of roughly $55.35 billion, or growth of about 7% at the midpoint. Wall Street had been forecasting revenue of $55.1 billion, so investors were surprised by the strength of Microsoft's outlook. 

Given its continuing robust growth, Microsoft stock is a buy.