Summary
Microsoft's Q3 FY25 results brought Wall Street exactly what it wanted: $70.1 billion in revenue combined with $3.46 per share, a 33% Azure growth, and Microsoft Cloud generating $42.4 billion per quarter. However, while these figures may appear similar to Microsoft's previous successes, believe me when I tell you that there are still plenty of challenges for Microsoft customers to consider when you dig below the surface of these results.
1. The AI burden falls on customers, not Microsoft
AI and CoPilot have evolved from Wall Street growth drivers to mandatory operational requirements throughout Microsoft. The increased market pressure has resulted in new pricing models and mandatory bundling schemes, reducing Microsoft's pricing flexibility. The outcome results in the following consequences:
Every renewal dialogue at Microsoft now includes CoPilot as a mandatory component even though customers lack return on investment and readiness.
Channel partners receive higher rebates when they sell M365 E5 bundles that include CoPilot.
Enterprises that fail to commit to the CoPilot roadmap receive lower discount possibilities from Microsoft.
CoPilot is now mandatory in most Microsoft renewals—regardless of ROI or customer readiness.
Several large enterprise clients have shared with us that CoPilot sales during the past year mostly stemmed from fear of missing out instead of solid business reasons for their use. Executives rushed to start their AI transformation but now need to prove ongoing recurring investment costs to their boards and CFOs, and this is where the issues begin to manifest.
The lack of quantifiable business impact, which shows real productivity gains or measurable cost savings, is causing organisations to pause their CoPilot expansion plans or develop internal analytics tools to monitor usage and determine the actual value per user.
This is not a technology problem. It's a licensing and expectation management problem. In our opinion, Microsoft needs to identify the increasing gap between its adoption metrics and business impact because, yes, it's generating short-term revenue, but in the long term, it will face potential trust erosion if it continues to fail to handle this issue.
2. Microsoft Security: Bundles, Competition, and the Road Ahead
Microsoft Security continues to operate as its core binding factor for Azure, M365, and cloud services. It provides a unified perspective for enterprise clients, using M365 E5, Compliance, and Governance SKUs to lock customers into higher-margin bundles.
From a negotiation standpoint, E5 security bundling is where we see the steepest discounting, but only when customers are willing to adopt the full compliance/security stack. Those that don't are offered separate or inferior offer bundles.
Deep E5 discounts are only available to customers adopting Microsoft’s full security and compliance stack.
However, the external security landscape is undergoing a rapid transformation. With competitors like CrowdStrike, Zscaler, and Sophos continuously expanding their AI-based threat detection and cloud posture capabilities, Microsoft faces intense pressure to maintain competitive and coherent security platform capabilities. We expect to see Microsoft start to make security startup acquisitions, especially those specializing in cloud-native and AI-infused security technologies, to help them close significant capability gaps quickly.
We'll be keeping an eye on Microsoft Security CoPilot's launch and integration process (as we're sure many others will be). The current implementation is a marketing initiative rather than a distinct product. Businesses need to analyze Microsoft's security direction against their existing risk management approaches because the increasing competition makes it essential to determine whether Microsoft's path aligns with their needs or if they should pursue multiple security options.
3. Azure Growth and the Changing MACC Reality
Microsoft's 34-35% Azure growth forecast for Q4 FY25 FY25 reveals a promising outlook. However, this could signal a tightening of the cost-optimization window for enterprise customers.
The Microsoft Azure Consumption Commitment (MACC) negotiations have evolved from general discounting to specific incentives based on growth targets. In real terms:
Customers renewing without year-over-year growth are offered 25-50% lower discounts
Only customers who demonstrate annual MACC growth between 25-40% qualify for better pricing discounts that depend on reaching $45M commitments over three years.
Clients with steady-state or conservative growth expectations (those in the Azure spend range of $10M–$15M per year) face single-digit discounts at renewal.
Azure customers with flat spend growth face 25–50% lower discounts at renewal.
This is a fundamental change. Microsoft is prioritizing mega-deals and treating smaller renewals as cost-neutral. The result is that many enterprises, especially those in regulated or flat-growth environments, will have to reevaluate whether MACC commitments still offer predictable ROI or become future liabilities.
🖐 Achieve optimal Azure cost efficiency. Learn more: Microsoft Azure Cloud Cost Optimisation.
4. The New Microsoft Sales Playbook: AI, Security, and a Partner-First Approach
Microsoft's upcoming sales reorganization, slated for July 1, is more than a structural reshuffle. It reflects a deeper prioritization: AI, Security, and scale through partners. With the simplification of six solution areas into three (AI Business Solutions, Cloud & AI Platforms, and Security), Microsoft is creating internal alignment and signaling the future of its revenue engine.
Microsoft’s new sales model favors large enterprises and partner-driven deals.
But for mid-market and even upper mid-market customers, this may create new frictions:
Fewer direct sales reps.
More push toward partner-led engagements.
Less pricing flexibility outside of large enterprise channels.
This change means enterprise buyers must be as sharp as ever in their partner management, contractual guardrails, and escalation strategies. Negotiating through the partner channel requires a fundamentally different set of tactics than direct Microsoft deals, and failing to adapt will mean losing leverage.
🖐 Be prepared for future contract negotiations. Learn more: Microsoft Enterprise Agreement Negotiation.
Final Thoughts
Microsoft's Q3 FY25 results show strength but also growing complexity. AI and Security are now more than product categories—they are pricing and negotiation levers. CoPilot is no longer optional in Microsoft's GTM motion. And MACC, once a tool for predictability, is becoming a challenge for CFOs to justify unless tied to aggressive expansion.
At SAMexpert, we're already seeing our clients reevaluate how they engage with Microsoft. They're asking harder questions, modeling real-time ROI, and internally preparing for longer, more layered negotiations.
Microsoft is not just selling software anymore; it's selling an AI vision. And in that vision, customers must either buy in fully—or pay the price.