Microsoft’s stock fell by nearly 2% after the company reported its quarterly results, but it ticked back up in the hours after.
Although the company beat its revenue expectations with an increase of 16% to $83b, and profits rose 23% to $38bn, its spending on AI has hit its free cash flow. That metric, essentially how much money a company has in its bank account, is important for investors.
Microsoft’s cash flow for the quarter came in at $15.8bn, down almost $6bn from a year ago.
Satya Nadella, Microsoft’s chief executive, said the company’s AI business is growing. He said the annual run rate of its AI business hit $37bn.
Such a metric, however, is a projection of future sales based on a multiple of current sales. The company did not specify the base level sales figure the run-rate was calculated on.
Amy Hood, Microsoft’s chief financial officer, said the company’s AI business was proving to be a smoother development than when the company began shifting to cloud services in the early 2010s.
“The margins have been and remain better in our AI business than when we were in our cloud transition,” Hood said.
The company’s stock is down nearly 11% so far this year, as questions around its spending on AI and its partnership with OpenAI, in which it has invested more than $10bn, have continued.