On Tuesday, beating Wall Street’s estimate, Microsoft fiscal first-quarter results in all segments, driven particularly by strength in its cloud-computing and PC businesses.
Microsoft fiscal first-quarter results showed revenue growth of 13% to $56.5 billion in the quarter ended Sep 30, compared with analysts’ consensus estimate of $54.52 billion, according to LSEG data.
Microsoft shares were up 4.2% in after-hours trading.
Microsoft fiscal first-quarter results out
“The results indicated that artificial intelligence products are stimulating sales and already contributing to top and bottom-line growth,” said Jesse Cohen, senior analyst at Investing.com.
Microsoft’s revenue growth from Cloud computing and PC business, which houses the Azure cloud-computing platform, grew to $24.3 billion, compared with analysts’ estimate of $23.49 billion, LSEG data showed. Azure revenue rose 29%, higher than a 26.2% growth estimate from market research firm Visible Alpha.
The company does not break out the absolute revenue figure for Azure cloud-computing platform, the part of Microsoft’s business best situated to capitalize on booming interest in artificial intelligence.
Artificial intelligence in sales
Wall Street is looking at how generative AI services may benefit Microsoft, which secured an early lead with investments in startup OpenAI, owner of the popular ChatGPT service.
Many of those AI services are not yet widely available. Brett Iversen, Microsoft’s vice president for investor relations, said much of the sales growth reported on Tuesday came from customers rekindling their use of Microsoft’s cloud in anticipation of using those services.
“What AI is doing … is opening up either new conversations or extending existing conversations or getting us back in touch with customers that we maybe weren’t doing as much with,” said Iverson.
Alphabet missing estimate
By comparison, Google-parent Alphabet’s cloud division missed estimates for third-quarter revenue on Tuesday as an uncertain economy and high interest rates led its customers to trim their budgets.
Microsoft revenue growth
Microsoft said on Tuesday that its fiscal first-quarter profit was $2.99 per share, above analyst estimates of $2.65 per share, according to LSEG data.
“There are some weaker areas; search advertising revenues, for one, is growing slower than most segments,” said Jeremy Goldman of research firm Insider Intelligence.
Microsoft said search and news advertising revenue excluding traffic acquisition costs increased by 10%. It does not break out the revenue figure for these operations.
Microsoft AI
Microsoft is weaving artificial intelligence in sales of its own products, such as the $30-a-month “Copilot” for its Microsoft 365 service that can summarize a day’s worth of emails into a quick update. While the tool is being shown only to a small number of pilot customers until it becomes available next month, it requires businesses to make a number of upgrades to their Microsoft-based systems in order to use Copilot. Analysts say this could generate sales for the Redmond, Washington, company ahead of Copilot’s wide release.
Investors watchful
Investors are also tracking how much Microsoft spends on the massive data centers to power AI software. Microsoft said on Tuesday that fiscal first-quarter capital expenditures were $11.2 billion, up from $10.7 billion in the previous quarter, which itself was the biggest spend since at least fiscal 2016.
Sales of its Windows operating system and other products in the segment grew to $13.7 billion, compared with analysts’ consensus estimate of $12.82 billion, according to data from LSEG.
The segment containing the LinkedIn social network and its office productivity software grew to $18.6 billion, compared with analysts’ consensus estimate of $18.20 billion, according to LSEG data.
