Microsoft reported faster third-quarter sales growth in its cloud computing unit, easing investor concerns about the return on spending on artificial intelligence infrastructure.
The world’s largest software company said its Azure cloud-computing business saw a 39 per cent revenue gain during the quarter after adjusting for currency fluctuations, ahead of the 38 per cent growth reported in the prior quarter.
Shares of Microsoft edged up $0.55, or 0.2 per cent, to $425.01 in after-hours trading.
Overall third-quarter sales rose 18 per cent year-on-year to $82.9 billion, beating Wall Street estimates of $81.4 billion. Net income rose 23 per cent year-on-year to $31.8 billion, ahead of analysts’ expectations of $30.26 billion.
The results could boost investor optimism amid fears that sluggish adoption of Microsoft’s Copilot 365 assistant for businesses and a heavy reliance on OpenAI have dented Microsoft’s early lead in the AI race. Microsoft has lagged rivals so far this year, with the shares down more than 10 per cent, while other big technology companies have posted gains.
Satya Nadella, chief executive of Microsoft, said: “We are focused on delivering cloud and AI infrastructure and solutions that empower every business to [achieve] their outcomes in the agentic computing era.”
Microsoft has invested $13 billion in OpenAI, the creator of ChatGPT, since 2019Reuters
Amy Hood, chief financial officer of Microsoft, said: “We delivered results that exceeded expectations across revenue, operating income, and earnings per share, reflecting strong execution and growing demand for the Microsoft Cloud.”
Microsoft is among four of America’s biggest public companies reporting results last night. Alphabet, Amazon and Meta Platforms also reported after the bell. They are among the biggest investors in AI computing infrastructure, spending hundreds of billions of dollars in a boost for chipmakers, power companies and data centre builders.
Microsoft said that capital expenditures were $31.9 billion in the quarter, below the average analyst estimate of $35.3 billion.
Microsoft made a big bet on OpenAI, the creator of ChatGPT, in 2019, and has since invested more than $13 billion, with OpenAI becoming a big customer of Microsoft’s cloud services.
This week it was announced that OpenAI renegotiated a pact that let Microsoft exclusively sell the ChatGPT creator’s AI models, clearing the way for the start-up to forge new deals with rivals including Amazon.
Microsoft will remain OpenAI’s primary cloud partner with a licence to the start-up’s intellectual property through to 2032.