Microsoft beats earnings expectations amid cloud, AI growth
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Continued growth in Microsoft's cloud business — fueled in part by the boom in AI — helped the software giant top sales and earnings expectations for the latest quarter, the company announced Thursday.
Why it matters: While there is lots of talk about AI, Microsoft is among only a handful of large companies that can point to a measurable growth in revenue.
- Microsoft's Azure and other cloud services grew 31% last quarter with AI accounting for seven percentage points of that growth, Microsoft said in a slide accompanying its earnings report.
By the numbers: Microsoft's quarterly revenue was $61.9 billion, up 17% and ahead of estimates of around $60.8 billion.
- Per-share earnings were $2.94, up 20% and well ahead of expectations of $2.82.
- Overall, Microsoft's cloud business brought in $26.7 billion in revenue, up 21%.
- Revenue from Microsoft's PC business was $15.6 billion, up 17%, with Windows revenue up 11% and revenue from its devices business, which includes its Surface PCs, was down 17%.
- Content and services revenue from Xbox was up 62%, though nearly all of that was thanks to its Activision Blizzard acquisition. LinkedIn saw revenue increase 10%.
- Revenue from the unit that includes Office was $19.6 billion, up 12%, with commercial sales growth outpacing the consumer side of the business.
What they're saying: Addressing criticism Microsoft is facing in the wake several major cybersecurity issues, CEO Satya Nadella stressed that the company is increasing its focus on security.
- "Security underpins every layer of the tech stack and it's our number one priority," Nadella said on a conference call with analysts. "We are doubling down on this very important work, putting security above all else, before all other features and investments."
Between the lines: Much of the AI boost is coming from the AI work being done on Azure's cloud rather than the slew of AI-enabled copilots that Microsoft has started offering to customers in recent months.
- Nadella said on a conference call with analysts that 65% of Fortune 500 companies are using the Azure service that delivers OpenAI's technology to businesses.
- The company has said it expects the assistants for Office and other products to eventually provide a meaningful boost to revenue as well, though it expects that to take more time.
- One area where copilot numbers are already significant is the GitHub coding assistant, which now has more than 1.8 million paid subscribers, Nadella said on the conference call.
Shares of Microsoft rose in after-hours trading following the announcement, with the stock trading recently at $414.51, up $15.47, or nearly 4%.
Editor's note: This story was updated with additional details.
