• Microsoft shares surged sharply today after the company released sales and revenue results that exceeded expectations in fiscal year 3.

• Sales for Azure and other services rose 33% in the third fiscal year, helping to drive revenue growth in the smart cloud space by 21% each year.

• Microsoft's forward guidance shows that the company will continue to see strong headwinds from artificial intelligence (AI).

Microsoft (NASDAQ: MSFT) Stocks voted higher in Thursday's trading after the company released strong quarterly results. Shares of the tech giant rose 9.2% as of 12:15 a.m. ET and 10.6% early in the meeting.

After the market closed yesterday, Microsoft released its third-quarter results for the fiscal year, which ended on March 31. The company surpassed expectations in sales and revenues due to impressive growth in its Azure Cloud Cloud Infstructure business and the issuance of encouraging forward guidance.

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In the third quarter, Microsoft earned $3.46 per share and $7.06 billion in sales. For comparison, average analyst estimates require the business to report $3.22 in sales per share of $68.44 billion.

Overall revenue for the period increased by about 13% year-on-year, with a larger performance relative to expectations, as sales in the smart cloud sector increased by 21% to $26.8 billion. In this segment, revenue from Azure and other services increased by 33% year-on-year. Meanwhile, sales in the sales division of productivity and business processes grew 10% to $29.9 billion, while the more personal computing segment grew 6% year-on-year to $13.4 billion.

Microsoft paired its third-quarter sales and revenue beats with strong fiscal first-quarter outlook. Management expects sales in the quarter to be between $73.15 billion and $74.25 billion, an annual growth of about 14% at the midpoint of the guidance range. In yesterday's earnings report, average analysts estimated that the business would require $72.26 billion in sales during that period.

Crucially, revenue in the smart cloud space is expected to be between $28.75 billion and $29.05 billion – a midpoint annual growth rate of 21%. Azure sales are expected to grow 34% to 35% in the quarter. Strong guidance for the cloud segment shows that Microsoft is continuing to see strong winds reversals in artificial intelligence (AI) and performance goals are helping to alleviate investor concerns that momentum is gradually disappearing in this regard.